Women make up half of the population, yet are mostly excluded from participating in the growing tech market in the UK. A few high-profile reports and ongoing research by British Business Bank, Diversity VC and British Venture Capital Association will confirm in late 2018 the dimension of the problem in our ecosystem.
The FBS Women in Enterprise: The Untapped Potential report in 2016 on lost market potential found that an estimated 900,000 businesses would have been created if women participated in the same proportion as they do in the US, a £23bn GDP lost value. At a country level, fewer women are in the process of starting their own business, 3% versus 5%.
The UK presents a structural challenge in supporting women in entrepreneurship. For the tech sector, this has further implications, as survival is directly correlated with a founder’s ability to raise funding. Over 70% of all women-led businesses are not successful in raising pre-seed, seed or early VC capital.
With VCs depending for deal-flow on an invisible private network, women founders are somehow disadvantaged. Women-led businesses have been underinvested and valued for the last decade, making this a systematic problem for the VC ecosystem. The differential of £0.4m in funding between women- and men-led organisations has been consistent over the previous 10 years, as found by a Tech City UK study.
Our research at Funding London shows that such companies are more likely to be backed by women angels and VCs, revealing a dimension of our sector that we have not considered.
In our engagement with our portfolio and beyond, we found that women founders require mentoring and network opportunities with women role models and VCs. A significant majority of the entrepreneurs surveyed perceive VCs as biased based on their gender, and almost all the founders suggested that not enough women were active decision-makers in domestic VCs.
More diversity in the VC ecosystem could potentially increase the cohesion between investors and founders, generating more market capacity and momentum for women founders at least in the early stages of their funding journey, where we have a structural gap.
Having more women investors should not merely be a paper exercise. The positive impact of diversity in corporations and executive boards has been documented over the last few decades, with organisations like 30Percent Club advocating for more inclusion. In the fast-paced world of technology investments, diverse teams could have an edge in identifying investment and market opportunities.
In our sector, we seem to like placing people in boxes, as if one’s ability to analyse precludes them from a higher ambition to have an impact and be part of a larger ecosystem. It should not be the case, as diversity in its broader sense of backgrounds and abilities should be promoted, for it delivers by far the best results.
Flavia Richardson, Funding London