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Thrive is set up by Funding London, a venture capital company bridging the finance gap for early stage businesses based in London. With over a decade’s experience in supporting the startups of London through a variety of funding vehicles, Funding London sensed a need to illuminate the ever-evolving scenario of London’s early stage businesses.

Thrive features interviews with and opinion from budding entrepreneurs, investors and industry experts. A mix of contributors from all areas of the industry is desired in order to spark genuine discussion about ongoing critical issues. While it showcases the effectiveness of successful ventures, it also encourages sharing lessons learned from missteps and unsuccessful projects.

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Trends · 5 October '18

How Do We Close the Funding Gap for Women Entrepreneurs?

It is the £23bn question which we should all attempt answering. Our economy is impacted by our inability to address the gender issues in the SME space.

What we are faced with is a choice: to continue measuring or to start addressing the challenge straight on.

In just a few weeks a report on gender diversity from British Business Bank will be unveiled. I expect that the findings will not depart from what we already observe in the UK market. It is hoped that at least it will set the scene for specific funding programmes.

A Recap

In 2015 the government commissioned a similar report, the FSB national survey which identified the skills and support requirements, the same cross-sector discrimination perceived by women founders. Highlighting that over 25% of all women founders surveyed believed were unable to fund their activities.

Further, in 2016, the story continued with the follow-up FSB report examining more in-depth the situation of the UK market, emphasising a structural problem in our economy:

  • Nearly a third (32%) of all self-employed people in the UK are Women (427,000 at 2016) compared with 28 per cent of self-employment before the recession
  • 20% of such businesses were solely owned by Women
  • 18% of SMEs are majority-led by Women
  • 38% of SMEs have women in management (1.2m organisations)
  • At a country level, fewer women are in the process of starting their own business (3% vs 5%).
  • 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

Examining only active SMEs, those with registered employees in the UK, women-led SMEs are underrepresented in the information and communication sector (11% of businesses led by women). In the education sector, women-led businesses made up 45% of the total. In the health services sector, women made up 56% of the total.

The study estimates that in the UK women-led SMEs contribute up to £75 billion to economic output (16% of the UK SME approximate GVA total).

Equality of opportunity is not just a good to have for women entrepreneurs, it is extremely important if we want to continue growing our economic output, and relevancy in the European market.

What can we do to help?

First, we have to provide free information and education. It is clear that to close the knowledge gap, we need to equip both men and women with the required tools in the pre-investment stages. Examples:

  • Educational workshops to improve funding and investor awareness.
  • Pitch training and business model evaluations.
  • Bespoke mentoring support, targeting confidence building.

Second, we have to develop a sense of community and forum, that is entirely missing. Instead of herding women towards programmes that fail to provide them with the right environment and opportunities for growth, we should spend time understanding what we need to address the challenges and deliver exactly that.

In my consultations with women entrepreneurs, I assess that the following are still very much missing in our ecosystem:

  • Mentoring and network opportunities focused on building and expanding relevant networks, which are not necessarily female friendly.
  • Sector specific round table sessions between VCs and female entrepreneurs.
  • Matching scheme with other women entrepreneurs who successfully raised funding.

Third, the adoption of specialist seed funding programmes could generate more funding opportunities for women entrepreneurs. Thus, addressing another issue, of smaller funding rounds, lower valuations, which results in reducing the pool of potential investors available to women entrepreneurs.  This inevitably rules out a vast majority of VC’s which unsurprisingly creates a reliance on angel investors.