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Why the Gender Funding Gap is Costing the UK Economy £250 Billion

The gender gap in funding for women-led businesses has been a hot topic of conversation in 2019, thanks in part to the publication in March of the landmark Rose Review.

The review, spearheaded by NatWest’s Alison Rose, found that there are twice as many male entrepreneurs as females, despite the fact that women make up 51% of the population. This gap in ownership reflects an even greater disparity in funding. In February, a study by the British Business Bank concluded that female founded companies received less than 1% of total UK venture capital, while male founded companies got a full 89%. Other recent surveys both here and in the US have shown similarly unequivocal results. The funding gap is real, and it is costing the UK billions in missed opportunity.

In fact, the Rose Review found that as much as £250 billion in new value could be added to the UK economy with a sustained and concerted effort to help women succeed as entrepreneurs. And there is every reason to believe that they would succeed. In fact, figures show that women-led businesses in the UK generate more revenue, deliver double the investment on return, and fail less often than male-led businesses.

So why is there still such a significant funding gap? One reason is that male VCs are less likely to invest in female-led businesses. This may be influenced by homophily (the tendency for people to associate and bond with those who are similar to them) as well as unconscious bias, including persistent myths that women are more risk averse, have less financial acumen, and are not as ambitious as men. And, while unconscious bias can also affect female VCs, they are still three times more likely to invest in companies with at least one female founder. Unfortunately, there have been very few women investors and inclusive male investors at the table.

However, a few recent developments offer hope for women entrepreneurs. In July, the government announced the Investing in Women Code, “a commitment to support female entrepreneurship in the UK by improving women’s access to the advice, resources and finance needed to build a business”. The list of signatories includes banks like RBS, Barclays, Lloyds and Santander, as well as venture capital firms and angel networks such as Frontline, Episode 1, Angel Academe and the UK Business Angel Association. Other recent initiatives include NatWest’s Back Her Business, a female-only crowdfunding platform, and Virgin StartUp’s commitment to fund as many female-founded businesses as those founded by men by the end of 2020.

We often shy away from big changes or challenges because we view them as a whole. Ask yourself: ‘if I was going to take one small step toward tackling this particular fear, what would it be?’ Then take that small step. Incremental tweaks to your mindset will give you a more objective view and help you to frame your fear as a problem to be solved, as well as breaking it down into the practical steps needed to crack it.

Of course, this is just the beginning. Much needs to be done to address the funding gap, including greater transparency in UK funding allocation, the formation of better support systems for women entrepreneurs, and educational initiatives aimed at girls and young women. Closing the funding gap could be the most significant economic opportunity of our generation, and I look forward – along with the Women’s Chapter members – to being a part of the solution.

To read more about the Investing in Women Code, visit the government website. You can also download the Rose Review here.

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