Female-founded businesses are also nearly a 16% less likely to receive funding, and when they do they get on average 30% less than male-founded start ups Whilst over half of women partner with men to found businesses, just one in ten men choose to join forces with women This is despite the fact that mixed-gender teams appear to do the best at securing early-stage funding
LONDON — In the last decade the number of female-only founded businesses has doubled in the UK. Despite this progress, new Boston Consulting Group (BCG) research has found that male only founded start-ups still outnumber women by nearly ten to one, and are 16% more likely to get funding.
When female-only founded start-ups do secure funding, it’s nearly a third (30%) less than what their male counterpart’s get, with the average receiving £4.9mil between 2008 and 2018, compared to £6.2mil for men.
“Whilst it’s encouraging to see that the number of female founded start-ups has grown in the UK, the statistics paint a clear picture that more can and should still be done to ensure we remove any unfair biases in the selection or funding stages,” says Nadjia Yousif, Managing Director & Partner at BCG.
The largest gap is in the crucial seed round, where male-only teams receive over twice the funding, securing £1.5mil compared to c. £620,000 for females. This stark disparity is seen not only in the amount secured but also in the chance of receiving funding through each series.
When BCG looked at the total number of start-ups expected to be receiving funding based on their maturity, they found that the proportion of women-only businesses drops at each stage. At Series A, there are 35% fewer female-only start-ups receiving funding, which rises to 60% in Series B, and 80% in Series C.
The research also found that whilst equal numbers of men and women start businesses alone (30%), over half of women go into partnership with men, meaning just one in ten chooses to partner with other women to form an all-female founding team. By contrast, 58% of men will go in to all-male founding teams, and just 12% choose to partner with women.
Yousif, who heads up Diversity & Inclusion for BCG in the UK, adds “It’s interesting to note that whilst men lean towards all-male founding teams, mixed-gender teams are in fact ten per cent more likely to secure early-stage and series funding. This highlights the importance of ensuring leadership teams are representative, as it can help start-ups tap into additional funding, as well as unlock revenue potential.”
Previous BCG research has shown that leadership teams that report above average diversity on management teams have been found to enjoy How Diverse Leadership Teams Boost Innovation, compared to those with lower than average.
Whilst mixed teams perform the best in terms of receiving funding (66% success rate), male-only teams still outperform all female teams with a 57% success rate, where under half of female-founded companies (49%) receive funding.
There are a number of contributing factors that help us understand why the funding gap is so large, and so persistent. 88% of senior leaders in the leading UK VCs are men, while 40% of these VCs have no female partners at all. Additionally, the Rose Review highlights that typically a higher proportion of women start companies in sectors that are less capital intensive, or require less funding rounds.
As well as mixed teams performing best when securing early-stage funding, previous Why Women-Owned Startups Are a Better Bet has found that start-ups founded and co-founded by women perform better as well, generating 10 per cent more in cumulative revenue over a five year period than male-founded companies.
“These findings add to the growing body of research that highlights not only the large discrepancy between male and female funding and leadership, but also the clear business imperative for closing this gap.” concludes Yousif.
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