Women-owned businesses are growing and succeeding - but are under more threat than ever.

In 2022, female founders built more new businesses in the UK than ever before. They responded to increased inflation and a challenging economic environment with innovation and entrepreneurialism, with women-owned businesses generating a collective ￡14 billion for the UK economy. This success echoes the trend for women-founded businesses: when controls are accounted for (size, sector, age, funding) women-owned companies outperform those owned by their male counterparts (Women in Enterprise: A Different Perspective, 2012).

Barriers to funding for women-owned businesses

One of the biggest challenges facing female entrepreneurs today is the inequalities surrounding access to funding. Women-owned businesses are statistically less likely to than their male counterparts to receive venture capitalist funding, with only an estimated 2% of funding from traditional sources going to women-owned businesses. (The Treasury Committee, 2021). ?This is despite female-led companies representing 20% of UK business in 2022, up from 16% in 2018 (The Rose Review, 2023).

Because of these barriers to VC funding, women-owned businesses often rely heavily on angel investment. An angel investor is someone who invests their own money in a small business in exchange for a minority stake or equity. In the past decade, female angel investors have invested ￡2.34 billion in UK companies, creating 10,000 jobs. Unfortunately, women remain a minority in angel investment, making up only 14% of the overall UK angel community (The Rose Review, 2023). This shortage of female angels has a direct impact on the UK’s female founders, as data shows that women are much more likely to invest in female-founded companies than their male counterparts.

The female angel community has taken a further hit, based on new government legislation that came into effect 31 January 2024. Previously, angel investors needed to earn over ￡100k to be eligible on investment platforms, making investing much more accessible to individuals. As of 5 weeks ago, the amount you must earn has been raised to ￡170k*, pricing many women out of investment opportunities. The data speaks for itself: less female investors mean less investment in women-led companies.

There are additional societal factors at play that work against women succeeding in business. Women are twice as likely as men to cite family responsibilities as a barrier to entrepreneurship (this not only includes raising children, but also caring for elderly or ill family members). And after the age of 35, the number of women starting new businesses falls sharply (The Alison Rose Review of Female Entrepreneurship, 2019). Finding solutions to counter disproportionate caring responsibilities must be a priority for both the private and public sector if we are to foster female entrepreneurship.

What can we do to make it more equitable for women owned businesses?

Perhaps most urgently, we need to broaden the opportunities for women in finding investment. This includes access to mentoring and networks and promoting greater transparency on the funding process. We need to inspire and empower younger generations, so that they can see examples of female success. It appears that the next generation of women are already taking notice, with 16-25 year olds founding 22 times more businesses last year than in 2018. The benefits for this growth could be immense: the gap between men and women owned businesses means that there is a potential ￡250 billion of new value that could be added to the UK economy if women started and scaled new businesses at the same rate as men. Something we can be sure of - when we support women-founded businesses, the economy benefits.

*After much outcry, the government has reversed the decision to increase the angel investor salary threshold in the budget, returning it to ￡100k. While this is positive, there is still much work to do to make accessing investment more transparent and accessible for women and other groups of less privileged people.