Research shows that the male-dominated funding ecosystem is holding back female-led tech firms. If the UK wants to become a tech superpower, this has to change, Jess Jones argues
The Sunday Times Rich List emerged last week, featuring the usual suspects such as Sir James Dyson, Lord Bamford, and the Issa brothers.
The 40 under 40 chart highlighted that many are making their millions through AI and tech companies rather than fashion.
Among the 2024 victors were Steffen Tjerrild and Victor Riparbelli, founders of AI video creator Synthesia; Martin Kissinger, who established Lendable to use AI for low-risk loan applicants; British twins Oliver and Alexander Kent-Braham, creators of AI-driven insurer Marshmallow; and Herman Narula, whose virtual space platform has amassed him a £780m fortune.
Aside from their shared success in the tech sector, they all have another thing in common: they are all men.
Where are their female counterparts?
There are of course several notable British businesswomen who have scaled successful tech businesses in the UK. Just look at Anne Boden, founder of Starling, Martha Lane Fox, founder of lastminute.com, Romi Savova, who founded Pension Bee and Poppy Gustafsson, founder and chief of Darktrace.
But they are in the minority, and none of them made the rich list.
At the heart of this issue are problems with the funding ecosystem, which is dominated by men.
Tech companies founded by at least one female director have been steadily increasing across the UK over the last decade, with incorporations growing from 211,000 to a record 272,000 between 2013 and 2022 – roughly 34.2 per cent of the total incorporations in 2022.
But just 3.5 per cent of equity raised in investment deals in the first half of 2023 went to businesses with an all-female founding team, compared to over 85 per cent secured by all-male teams, according to a report from Beauhurst.
“Start-ups led by women continue to receive a fraction of the venture capital funding going towards male-led companies, despite a record number of women starting businesses in the UK.”
Freddie-Nicolle Brace, head of legal at 1st Formations and QCF
“We know that tech is one of the biggest sectors for the fast-growing number of women founders in the UK, as shown by the landmark Female Founders Index,” said Freddie-Nicolle Brace, head of legal at 1st Formations and QCF. “Although access to funding for women in this sector is better than the cross-sector average, we’re still far away from bridging the divide. Start-ups led by women continue to receive a fraction of the venture capital funding going towards male-led companies, despite a record number of women starting businesses in the UK.”
Research by Natwest found that of a total 36,800 angel investors in the UK, only 14 per cent (5,064) are women, and less than 0.5 per cent (157) of female angels have achieved a portfolio of 10 or more. As such, tech companies with women at the helm rely on male angel investors, who have been found to be less likely to invest in female-led firms. This bias can end up limiting their growth and increases the risk of failure.
Female tech millionaires could serve as inspiration for other women to pursue careers in business and technology, where there is a talent shortage. But the failure to properly fund female-led tech firms is stopping this from happening.
Making sure we support more women who are leading new tech firms is not only fair, it is financially smart too.
Female-run private tech companies generate a 35 per cent higher return on investment, according to a study by the Kauffman Foundation. Another study by Mass Challenge and BCG found that women-founded startups generate over twice the revenue per dollar invested compared to those founded by men, making them better investments.
Some groups are trying to change the status quo, such as venture capital funds Angel Academe and Alma Angels, which focus on female-led startups.
Boden recently said it was important to “put pressure on the private equity and venture capital industry to have more women making decisions,” in order to improve outcomes for women in tech, which she said “haven’t got that much better in the past 40 years”.
Other ideas also include forcing VCs to report diversity data, setting investment quotas for women and people of colour, or new tax incentives to get more angel investors to back female-led firms.
If the UK is serious about becoming a tech superpower, it needs to start championing female tech founders now. Only then will we start to see more female tech leaders rank in the UK’s rich list.