Investing in Women

In 2019, the government commissioned Alison Rose, the Chief Executive of the NatWest Group, to lead an independent review of female entrepreneurship. The Rose Review shed light on the barriers faced by women in starting and growing their businesses and identified ways of unlocking this untapped talent.

Rose highlighted some stark gender gaps across the UK. Whilst women do not lack ability or ambition, only 1 in 3 UK entrepreneurs is female: a gender gap equivalent to 1.1 million missing businesses. Female-led businesses are on average only 44% of the size of male-led businesses, in terms of their contribution to the economy, and male-led SMEs are five times more likely to scale up to £1million turnover than their female-led counterparts. Worryingly, fewer UK women choose to become entrepreneurs than in best practice peer countries such as the US, Canada or Australia. The Review found that funding is a key barrier for female entrepreneurs at every stage of their business journey. Women were found to launch businesses with less capital than men on average, were less aware of different funding options and were less willing to take on debt – perhaps due to the unconscious bias which is known to still exist in the boardroom.

As one of the main recommendations arising from the Rose Review, the Investing in Women Code (the Code) was launched to develop a better picture of the provision of funding to female entrepreneurs across the financial services sector, and to encourage signatories to adopt and share best practices to support female entrepreneurs.

Data collected to date shows that in venture capital, female founders are substantially underrepresented. All-female teams account for only 10% of investment pitches that reach signatory firms, while mixed gender teams make up 24%. Of teams that actually receive funding, only 6% of teams are all-female, and 26% of teams are mixed gender. The correlation between building a diverse and talented team and the delivery of a strong company performance is well documented, so increasing the size of the available management talent pool by encouraging more female participation is a sensible aim and undoubtedly in the interests of the UK SME sector.

It also appears that networks and access are crucial: founder teams who have a 'warm' introduction to a VC firm are seven times more likely to reach the Investment Committee stage and be funded. There are likely many reasons for this ‘network effect’, but those opportunities introduced by known contacts may have benefited from better preparation by advisers with detailed knowledge of VC requirements prior to their introduction and hence have a higher probability of success.

One negative impact of female entrepreneur under-representation is certainly the heightened risk of perceived bias with the UK venture finance community, at a time when industry, politics and many other facets of society are focused on ensuring a greater equality of opportunity. This was highlighted by some female entrepreneurs within the Rose review, who were reported as feeling judged to be less competent than their male peers. This perception risks discouraging overall female entrepreneurship, but is also a complex issue to address. Clearly, if companies with management teams including women form only a small part of the overall pipeline of investment opportunities, there is no easy way to increase the proportion within an investment portfolio whilst maintaining the high quality standard that each opportunity must be measured against. Given this background, there is therefore a clear need to support initiatives that increase access, improve networks and encourage greater numbers of women to consider an entrepreneurial career from the outset.

Maven is therefore very proud to join the list of signatories to the Code. One of the key reasons for joining the initiative is to send a clear positive signal to all entrepreneurs who are looking for funding, that Maven is committed to supporting diversity and inclusion in access to finance. Maven is already involved in a number of initiatives that promote female entrepreneurship, including Fund Her North (www.fundhernorth.com), a Northern-based volunteer collective of female investors, who together have a combined track record of over £75 million invested in female-led, start-up businesses. Maven is also working with schemes such as Future Asset (www.futureasset.org.uk) to mentor girls in Scottish high schools to learn about the world of business, finance and investments.

Alongside other signatories to the Investing in Women Code, Maven will be contributing to the annual ‘Investing in Women’ survey, providing a means to measure change across the sector as these, and many other initiatives take effect.

It is encouraging that initiatives like these are making a concerted attempt to close the gender funding gap and tap into the unrealised potential of female entrepreneurs, but there is still a way to go. Maven will continue to do whatever we can to improve the business ecosystem for entrepreneurs, businesses, investors and society alike.

At Maven we believe that the success of any business we back lies in the talent, vision, commitment and dynamism of the people involved, whatever their gender. If you would like to find out more about how Maven investment process, please get in touch on funding@mavencp.com.