Back in 2019, The Alison Rose Review of Female Entrepreneurship was published, spelling out just how bad the environment was for would-be female entrepreneurs. She was blunt in the opening words of her introduction
“I firmly believe that the disparity that exists between female and male entrepreneurs is unacceptable and holding the UK back. The unrealised potential for the UK economy is enormous.”
There is no doubt that, in essence, excluding half the population from innovating and helping grow productivity has to be bad news. The Review stated that £250 billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as UK men. Even with a more modest aspiration of matching best-in-class comparator countries, if the UK were to achieve the same average share of women entrepreneurs, this would add £200 billion to the UK economy. A guide from the British Business Bank directed at would-be female entrepreneurs, highlighted the biases of society that may make it so hard for them to obtain money from the Venture Capital sector. Whether VCs (approximately 90% men) are aware of their biases when making decisions is less clear.
In the five years since the Rose Report, it isn’t obvious that a great deal has changed. Indeed, if anything things seem to be going backwards. According to data from the Invest in Women Taskforce, all-female founded businesses received just 1.8 per cent (£145m) of the total value of equity investment in the first half of 2024, a fall from 2.5 per cent in 2023. But this group is not just collecting statistics. This week they have announced a £250M pot for female-led businesses, with allocations being decided by female investment decision-makers across the UK. When the call to create this fund was announced last September, it received strong backing from Rachel Reeves, the first woman to hold the post of Chancellor of the Exchequer, who will be attending Task Force events. The money in the new fund has come from major companies, including Barclays and Aviva. It should kick-start many an enterprising woman’s new company, opening up novel avenues and creating value for the economy. One has to hope that it will also kick-start all VC funders to start thinking seriously about who they fund and who they reject (and why).
Ensuring that aspiring female entrepreneurs have the same access to venture capital funds as their male colleagues, is not just a question of moral fairness, although it is obviously that. It is also important for the growth that the Government is committed to, by creating new businesses and solving problems that may be particularly important for the female half of the population, no small number of people. As one of the Vice Presidents of the European Innovation Bank, Lilyana Pavolova, stated in 2020
“it makes economic and business sense to ensure that women entrepreneurs gain access to the same opportunities for success as their male counterparts.”
Also back in 2020, A PNAS study showed that underrepresented groups, such as women and ethnic minorities, produced higher rates of scientific novelty than their majority counterparts. Worryingly, their novel contributions were shown to be more likely to be devalued and discounted. Without in any sense implying there is a ‘female’ way of doing science, every scientist, engineer, technologist and inventor will approach problems based on their whole life experiences. Sometimes this means they will tackle an issue from a different angle from their (male) neighbour because of their view of the world, and they see areas where innovation can make a big difference that others may perhaps miss. Whether it is underpinning science or upstream technology solutions, perspective will colour any individual’s approach.
One such upstream area is so-called femtech, an area in which companies focus on technology-driven products, services, and software designed specifically to address women’s health and wellness needs. These are typically headed up by women who spot the need and the niche for the novel product. The evidence shows that fundamental research into health problems that predominantly affect women – think endometriosis, where the data has been analysed – are under-researched and underfunded. This underfunding occurs despite the significant economic burden of the disease in terms, for instance, of days off work for those women who are badly affected by the disease. Women will be very conscious of areas such as this, but femtech reaches far beyond disease. Data shows that slightly over 50% femtech companies are fully female-founded, a figure that can be compared with the 6% of high-growth UK companies which are fully female founded in other sectors. It is a high growth area but could grow more if venture capitalists were more willing to invest in such start-ups.
The money announced by the Invest in Women Taskforce is a welcome addition to the funding portfolio. While many women may not want to be treated differently and, in this specific case, in a sense more advantageously because they are women, the reality is that currently they are being treated differently already, but in the opposite direction. It is to be hoped that, as more people realise that women really are capable of becoming successful entrepreneurs, we will see wider VC funds investing in female-led start ups. And this will be to the benefit of everyone, including the Treasury. Rachel Reeves sees the value in funding female entrepreneurs for growth, innovation and productivity.
