Venture capital (VC) remains overwhelmingly male-dominated, both in terms of who controls investment decisions and who receives funding.
Despite women founding one in five startups in the UK, only two per cent of VC funding goes to all-women teams.
This is the lowest figure in five years.
“That’s not just a statistic – it’s a serious economic loss”, said Jayne Sibley, chief executive of fintech startup Sibstar.
Meanwhile, women make up just a fraction of investors themselves.
Following International Women’s Day last weekend, Julia Groves, investor partner at Sustainable Ventures (SV), spoke to CityAM about this disconnect.
“This idea that there aren’t enough investable female founders simply isn’t true”, she said.
“There are plenty of female entrepreneurs taking on massive challenges, they’re just not getting matched by the investment community. That is the restriction”.
SV has taken a different approach, with nearly a quarter (23 per cent) of its investment going to entirely female founded businesses, a rate 12 times higher than industry average.
Two-thirds of its investments include startups with female or underrepresented co-founders.
“International Women’s Day is a time to reflect on the huge progress we still need to close the investment gap”, added Diana Greenhalgh, operations lead at Virgin StartUp. “More than a fifth of female founders say access to funding is their biggest challenge”.
Systemic barriers in venture capital
The under-representation of female entrepreneurs in investment is largely systemic.
According to Groves, traditional recruitment and funding models favour the same networks, which are overwhelmingly male.
“One of the things we get very wrong in the investment sector is recruitment”, she said.
“There are expectations of the experience people need to get into investment decision-making, and it’s such a long list of criteria. At some point, enough experience becomes too much experience, because it closes your mind to radical ideas.”
Investment committees that lack diversity, whether all male or all female, introduce biases that shape the flow of capital.
This has real consequences for female founders, who often find themselves pitching to rooms of men with little understanding of their market or lived experiences.
“At Sibstar, we’ve been fortunate to gain backing from incredible female leaders, but for many women, the odds remain stacked against them”, added Sibley.
The culture of VC is another hurdle.
Women in their thirties, often balancing career and motherhood, face structural challenges that make it hard to return to investment roles after taking time off.
“It’s got to be easy for them to come back into that environment and have that work-life balance”, Groves said.
“It’s about people, incentivisation, and policies that don’t lose women as they become mothers because there’s a space to come back to”.
Female investors
One of the biggest hurdles is not just getting women funded but also getting them into venture capital investment roles in the first place.
SV has made deliberate efforts to change this, with 289 female investors actively engaged in its fund.
Groves said that, culturally “we’ve been a bit complacent about the level of female investors.”
Even when women are listed as investors, unfortunately, they aren’t always the ones making the decisions.
Groves explained that a previous fund she worked in had “an extraordinary number” of female investors.
“I was extremely pleased with myself”, she said, “until I realised that the husbands were using their wives’ names to be tax-efficient”.
“it can also be the case that female investors aren’t actually making their own investment decisions”, she added. “We need to change that”.
Financial education is key to getting more women involved in investment.
“If you aren’t changing the makeup of your senior decision-makers, and if you don’t align incentives with investors, the same issue is going to repeat itself”, Groves said.
“Women should kick the tyres – let’s have some rigour.”
SV demonstrated that backing female founders isn’t just about representation, it’s also good business.
The firm boasts a 3.1 times average return on investment multiple, and a 75 per cent survival rate among its portfolio companies.
This far exceeds the industry average of 60 per cent.
“That’s because of nurturing”, Groves explained. “With SV, we’re just being a bit patient. The support program among your own peer group makes a massive difference”.
Its approach includes funding, peer support networks, flexible working environments, and tailored financial education.
Beyond traditional venture capital
Many are looking at alternative funding routes with the VC backdrop still failing women.
Crowdfunding, revenue-based financing, and female-led angel networks offer a way to bypass traditional barriers.
Groves argues for purpose-driven investment models that prioritise sustainability and diversity to attract more women into the space.
“More women will invest when they see options aligned with their values”, she added.
She urges women to “pick the right fund, one that cares about what you care about, then delegate the decisions to them on your behalf”.
This week marks a year since the ‘sexism in the city’ report by the Treasury Select Committee, which highlighted deep-rooted gender disparities in financial services.
The report found that, despite industry pledges, progress remains slow.
The women in finance charter was introduced to tackle these issues, but Groves believes more needs to be done to hold firms accountable.
She argued that industry change will not occur unless firms take proactive steps to recruit more diverse decision-makers.
“It’s getting harder and harder for VC firms who haven’t already got diversity to attract it”, she explained.
“My personal view is that the harder the path getting you through education, starting a business, and raising money, the better you develop resilience. You’ll get a bit more grit. And that’s what the investment world needs more of”, she added.