The evolving legal and economic landscape
As highlighted in our article last year, the data is stark when assessing the level of venture capital funding accessed by female-led companies in comparison to male-led companies. Female-led companies account for 21.1% of companies in the United Kingdom. However, they receive a disproportionately low 6.9% of funding from venture capital investors as opposed to 74.2% received by male-led companies in 2024.
There has been significant growth in the proportion of female entrepreneurs to male entrepreneurs since 2018 (from a ratio of less than 1:2 in 2018 to more than 4:5 in 2023). However, disappointingly, data shows that there are no great signs of progress in female-led companies accessing funding despite many worthwhile initiatives being undertaken across the UK. Moreover, there has been a lack of structural changes made to the investment industry to try to address the imbalance in funding opportunities.
Legal and structural barriers facing female entrepreneurs
Reports from groups, like the UK Women in Business Taskforce, highlight how prioritising diversity on boards and in business ownership boosts productivity, innovation, and overall success in the investment landscape. Research by Dr Caitlin Schmid, Global Institute for Women’s Leadership King’s College London, shows that female-led companies in the past year outperformed male-led companies in respect of turnover growth. Despite their potential, however, female-led businesses face substantial challenges in accessing venture capital.
1. Implicit bias in investment decisions
Research from the Harvard Business Review, reveals how unconscious biases can play a detrimental role in investment decision-making, which may contribute to disparities in funding outcomes.
Female entrepreneurs are often viewed as inexperienced or overly cautious compared to their male counterparts, which can determine the success or failure of a funding application. Raising awareness of these patterns, and consciously shifting our preconceived narratives on female entrepreneurs, can help ensure that all entrepreneurs are evaluated on equal footing.
2. Underrepresentation in decision-making
Women continue to be underrepresented in decision-making roles within the venture capital industry, a factor that exacerbates gender disparities in the industry. Despite growing awareness of the importance of diversity, studies show that women still hold a small fraction of leadership positions in VC firms, thereby limiting their influence over funding decisions and perpetuating systemic biases. The lack of representation in the investment industry is thought to contribute to the underfunding of female-led startups, as decision-makers subconsciously gravitate toward entrepreneurs who share similar backgrounds or experiences and female investors generally focus their investments within their family networks.
Increasing the presence of women in leadership roles within the VC industry could help broaden perspectives, enhance investment strategies, and unlock the untapped potential of female-led companies.
3. Primary care responsibilities
The Rose Review is clear that female entrepreneurs held a disproportionate level of family and caring responsibilities and were twice as likely as men to mention these responsibilities as a barrier to creating or growing a business.
A JP Morgan study examining male and female small business owners revealed notable differences in goals for business growth. While 70% of female entrepreneurs explicitly aimed to maintain their businesses at the same size, only 63% of male entrepreneurs shared this perspective. We suggest institutionalised barriers, such as unequal access to resources and societal expectations shape women's entrepreneurial goals and influences women to prioritize stability over growth.
These studies highlight that there remains structural societal challenges for women in business.
4. Investment habits
The Gender Index Report 2024 highlights that female investors are far more likely to invest through family connections than male investors. Male investors who invest outside of their family network outnumber their female counterparts by two to one.
There is significant work to be done to extract more female investment outside of the family network and to raise awareness of investment opportunities for women. This would encourage growth across the UK in a climate where the government is looking to encourage a move away from safe investments into riskier investments with greater growth potential.
Overcoming barriers: The role of venture capital
To unlock the full potential of female entrepreneurs, the VC ecosystem must adopt targeted strategies to dismantle these barriers:
1. Promoting female investors & signposting funding opportunities
Female-led funds and female investors generally play a pivotal role in championing diversity by supporting underrepresented entrepreneurs and investing in businesses that might otherwise be overlooked. These funds not only empower female entrepreneurs but also prove that diversity drives innovation and can deliver strong returns. Highlighting success stories can help shift perceptions and encourage broader participation in the industry.
Connecting female entrepreneurs with female-led VC funds and investors more generally can help build networks and create pathways for success. Promoting these funds through visibility, mentorship, institutional support and the available tools is essential to creating a business and venture capital landscape that reflects the full spectrum of talent and ideas. There are now AI products, such as mnAi, that can help to bridge the gap between investors and female-led companies. We hope that venture capital investors will use such products to find businesses outside of the usual funding pools.
The VC ecosystem also has a role to play in positive storytelling and signposting what investment and finance opportunities or options are available to businesses. The business finance system can be impermeable and time-consuming to understand. Tax reliefs such as the Enterprise Investment Scheme are complicated and require professional advice. All stakeholders need to work together if the true growth potential of all businesses are to be unlocked.
2. Creating targeted funding programs
VC funds should actively commit to developing funding programs specifically designed to support female entrepreneurs. Initiatives such as Innovate UK’s Women in Innovation, HATCH and the Female Founders Fund demonstrate the potential of targeted programs to bridge the funding gap and empower female-led companies. By providing resources and tailored opportunities, these programs address systemic barriers and foster an environment where female entrepreneurs can thrive.
3. Enforcing diversity metrics
Voluntary initiatives like the UK’s Investing in Women Code have shown that diversity-focused investment strategies can help expand opportunities for underrepresented entrepreneurs, with government reports finding that fund managers who have signed up to the Code are more likely to invest in female entrepreneurs.
Introducing accountability measures and diversity metrics in VC firms’ portfolios can create accountability and ensure a fairer distribution of capital.
However, the lack of progress in recent years in bridging the funding gap between female-led companies and male-led companies demonstrates that there is more to be done and structural change is needed to break the cycle of underinvestment in female-led companies.
A call to action
The venture capital industry has the power to make change happen. It has the opportunity to empower female entrepreneurs and drive innovation. By recognising the legal and structural challenges women face, embracing the unique strengths women bring to the table, and implementing inclusive practices, the VC ecosystem can play a pivotal role in fostering a more equitable and prosperous future. Breaking down barriers isn’t just about fairness—it’s about unlocking untapped potential and creating lasting value and economic growth for all.
DWF has a market leading venture and growth capital practice in the UK, supporting investors and companies across several sectors including financial services, technology, media and telecommunications, life sciences and healthcare and real estate and infrastructure.
If you have queries on any of the issues covered in this article, please contact one of our experts.
We would like to thank mnAi for their support in producing this article. The Gender Index 2025 was published on 6 March 2025
Authors:
Gabriella Rasiah
Sofie Gill
Douglas Pyrke
Caroline Colliston
