Across the UK market it is compellingly the case that not enough capital flows into female founded businesses compared with male-led businesses. There is clearly a gender gap in terms of venture or early stage investment. In this article I want to pose a few questions, based on Oxford Innovation’s own data on investing in all-female founder teams, about what we might want to focus on to address the issue.
The British Business Bank’s Small Business Equity Tracker Research* reports that in 2023 all-female founder teams raised 162 deals worth £232m while all-male founder teams raised 1,413 deals worth £6.5bn during the same period. The average deal size for the all-female teams was £1.4m and for the all-male £4.6m. Furthermore, these disparities appear to apply to follow-on rounds and bear no relation to sector variations. It’s a strong and persistent pattern.
So, following on from International Women’s Day, which is a fulcrum for paying attention to issues of inequality or barriers for women, I want to share some data from our company, Oxford Innovation Finance. This data-set is derived from examining the last 10 years of investment behaviour of our angel and venture investors as they have chosen to invest in early stage businesses led by all types of founders. As one of the largest and most active angel investment networks in the UK, our data represents both a long time series and a reasonably large data set, so I believe the findings from its analysis are worth sharing and discussing, particularly as the data from our angels appears to show something different to the gender gap described above.
Our data shows:
- Over the course of the last 10 years, only 2.9% of the businesses that pitched with Oxford Innovation were led and founded by women only teams. So this is similar to the national pattern of many fewer all-female founded businesses seeking venture funding.
- 50.9% were led and founded by male only teams and 46.2% were led and founded by teams of mixed gender.
- However, and this is the surprising result, of these groups, the most successful at raising finance were the female only teams, which raised 5.75% of the money raised. In other words, they received nearly twice the share of funds raised that you would have expected if all the categories had been equally successful.
- The male only teams were the least successful (they were also, as we have seen above, the most numerous) in terms of the amounts of money raised, receiving on average less than half the amount that the female-founded teams raised.
- And the mixed teams were better than all male but much closer to the all male teams than to the all female teams.
When I look at these statistics, I am struck by two thoughts:
- First, I don’t think I can draw a conclusion that there are biases against female founded businesses in the behaviour of Oxford Innovation’s angel and venture investors. In fact, there is evidence of a slight positive bias towards female founded businesses.
- Second, the really striking piece of data is the 2.9% (all female) vs the 50.9% (all male). If I was a policymaker, I think it would be sensible to look longer and harder at why women found fewer businesses (that are seeking early stage capital). In Israel, 22% of venture capital by volume went to female founded businesses, which suggests there really is huge scope for improvement!
The British Business Bank published a report indicating that only 2% of venture funding flows to female founded businesses which has particularly lent emphasis to the perspective of ‘bias in the behaviour of investment funds’ in suggesting solutions to this problem. I wonder if the problem is located more in the gender biases that are in the encouragement or messaging that applies to starting a business in the first place.
In considering whether there is a reason why Oxford Innovation might experience a better return for all-female founders than ‘the market average’, I have a few guesses:
- First, for many years a woman played one of the leading roles in originating much of our deal flow. Has that made a difference?
- Second, our investor network is one of the largest in the UK, with about 700 actively investing angel members. Does this make it more likely that there will be some person, male or female, receptive to an innovative proposition than might be the case with a smaller angel community?
- Finally, it is recognised that female founders are less likely on average to be well connected to investment networks than male founders. Having been around for over 30 years and being quite well known, with a network of innovation centres and incubators as well as specialist business support programmes, is it possible that we manage to reach into more under-served pockets of innovation and enterprise than other venture investors do? A recent insight report on Investing in Women published by our company, Oxford Innovation Advice, highlights that women-led businesses excel when supported with expert advice, with 37.1% of participants on Oxford Innovation’s Access to Finance programmes being women-led, far exceeding the national average.
I have interviewed a number of female-led businesses that have raised funds through Oxford Innovation as well as female angel investors from whom I develop the following questions and suggestions:
- Is there a systemic cultural bias in the provision of role models or encouragement of entrepreneurship among women?
- Do women typically start the kind of business that is less likely to seek early stage equity capital? There is some evidence that female entrepreneurship has traditionally favoured certain sectors, which might be less capital hungry and there is also some evidence that female leaders are more effective in their deployment of capital.
- If you were putting energy into addressing this huge imbalance in the rate at which all-female teams seek to raise venture capital, would you put more energy into investors and their behaviours or would you put more into encouraging female entrepreneurship? And if you would answer ‘Both’, then how you would split a £1000 pot between the two objectives?
There is a related question which I intend to research further which is that there are markedly fewer female angel investors in the UK than there are men. This must lead to certain kinds of bias in investing habits and the opportunities for certain kinds of businesses to receive the investment and perhaps advisory support that they would benefit from. I don’t know if this second point about fewer female angel investors is related to the point about fewer female entrepreneurs or not, but I suspect that it could be.
At Oxford Innovation Finance, we’ve been connecting investors with carefully selected businesses through our angel investment community, Oxford Investment Opportunity Network (OION), for over 30 years and we believe strongly in the importance of its mission. Improving the flow of great start-ups bringing innovations that solve important world problems is not a gender related opportunity, so it would be great if we could have all possible contributions and not just from those that have been suitably encouraged to bring their innovation to market.
David Crichton-Miller, Group CEO
*Small Business Equity Tracker Report 2024, pages 31-34: https://www.british-business-bank.co.uk/about/research-and-publications/small-business-equity-tracker-2024
