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Female entrepreneurs still struggle to get funding

23 Mar 2018


Women are often taken less seriously by investors, but a growing number of female VCs could level the playing field 


Female entrepreneur LBS

A greater number of women working in venture capital (VC) would help address the problem of female entrepreneurs finding it harder than men to get funding for their start-ups. 

A recent Telegraph survey found that two thirds of female business owners in the UK felt they had not been taken seriously by investors and banks when trying to secure capital . Of the 750 female founders polled, 65% said they had been unfairly treated by financial services when trying to raise funding, while 67% who had met with male investors said they would have been treated differently if the investor had been a woman. 

“Surveys like this highlight that there are likely multiple investor motives that contribute to the challenge faced by female entrepreneurs,” said Bryan Stroube, Assistant Professor of Strategy and Entrepreneurship at London Business School (LBS). “Part of the problem is a direct result of things like harassment. 

“Another part is driven by the fact that some investors may only have previous experience with male entrepreneurs and then use gender as a sign of ability. When trying to level the playing field for male and female entrepreneurs, it may be best to think of these as separate issues with different solutions.”

About 8% of partners at the top British VC firms are women. Fewer than 20% of chief executives, chief financial officers and board directors among the UK's largest 280 financial services firms are female. 

Stereotypes about female entrepreneurs persist: women are more cautious, they aren’t willing to grow their ventures, they don’t have sufficient resources and their ventures underperform. But recent research shows that these stereotypes about men and women aren’t supported by performance data

“It’s a sad situation,” said LBS alumnus Hussein Kanji, Founding Partner of Hoxton Ventures. “The good news is the rise of female investors. In the UK, Tracy Doree, who we backed, and Leila Zegna have built Kindred. Ophelia Brown also has a new fund, Blossom Capital. The best fix is to get balance at the investor level. The numbers of women doing investing are low but we are seeing progress.” 

In the US, all-women start-up teams received just US$1.9 billion (£1.3 million) of the $85 billion (£60 million) total invested by venture capitalists last year, according to data from the M&A, private equity and VC database PitchBook. 

Mitali Pattnaik, Director of Product, LinkedIn Groups, and an alumnus of LBS’s MBA programme, said: “The problem for female entrepreneurs is that a great idea isn’t enough. For any idea to succeed, a founder has to inspire venture capitalists to fund him or her. Yet out of $85 billion invested by VCs in 2017, female founder teams only received a tiny 2% of funding, which is simply abysmal. 

“Clearly VCs are much more likely to bet on a man’s idea than a woman’s. We still have to do a lot of work to level this playing field and for women founders to be given the same kind of credibility. We’re not even close. One obvious place to start is to get more women into venture capital so that they can better understand, empathise with, and bet on women entrepreneurs. Only 4% of General Partners of VC firms in the US are women and this number has actually declined in the last few years.” 

Martha Silcott, CEO and founder of FabLittleBag and a recent Real Innovation Awards winner, said that as a woman, being taken seriously by investors relies on three things: “One, know your numbers – and they must be based on thought-through assumptions and reality, not pure bravado thinking. Secondly it’s about your attitude and making sure that your belief in yourself, your team and your product shines through. Thirdly, have a plan to grow your business.”

“If you need seed funding then the relevance of your idea, your personality, your belief and drive is so important,” Silcott continued. “If you’re at second stage funding, the numbers and experience to date start to become more relevant in the eyes of the investors. The bottom line is that you can’t do more than to be yourself and be honest about your proposition. If that isn’t enough for one investor, go find yourself another one.”

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