The UK’s Department for Business and Trade has revealed that venture capital fund managers who have signed up to the government’s ‘Investing in Women Code’ are more likely to invest in female founders.
Just shy of a third (32 per cent) of all venture capital deals made by Investing in Women Code signatories were in female-founded companies last year, compared to the market average of 28 per cent. This finding, revealed in the latest annual Investing in Women Code report, means this is the fourth year in a row that Investing in Women Code signatories have outperformed the wider market.
Founded in 2019 as a response to the Rose Review finding that a lack of funding is one of the largest barriers to women effectively scaling a business, the Investing in Women Code aims to support female entrepreneurship in the UK by improving female founders’ access to tools, resources and finance from the financial services sector.
“After four years, the data still shows that a higher percentage of venture capital deals made by Investing in Women Code signatories feature at least one female founder, compared to the wider market,” explained Louis Taylor, CEO of the British Business Bank. “While some progress has been made across the venture capital sector to improve access to finance for female founders, there is still a huge amount more to do, which we can only achieve by working together to promote greater equity and inclusion to back innovation and economic growth across the UK.”
Investing in Women Code Partners include the British Business Bank, British Private Equity & Venture Capital Association (BVCA), UK Business Angels Association (UKBAA), UK Finance, and Responsible Finance.
However, not all findings were positive, with the average amount of angel investment in all-female teams 50 per cent lower than the amount invested in mixed-gender teams and all-male teams.
Building on previous successes
By working towards providing equal access to finance, Code signatories hope to boost the potential of female-founded businesses and support the government’s priority to grow the economy.
Over 250 organisations have already signed up, highlighting that more lenders and investors are committed to increasing the levels of finance directed towards women-led businesses.
Diversity within signatories’ investment committees improves outcomes for teams with at least one female founder, according to the latest edition of the report. It also revealed an increasing number of female angel investors in the UK. In fact, three angel signatories consisted entirely of women angel investors, triple the number of last year’s cohort.
Female representation also proved a significant factor. Overall, angel groups with over 15 per cent of women investors made 57 per cent of their investments in teams with women founders.
The 30 new venture capital signatories reporting for the first time in 2023 invested a higher share of deals to teams with at least one female founder compared to all signatories and the wider market, with 42 per cent of deals going to teams with at least one female founder (14 per cent higher than the market average).
Jenny Tooth OBE, executive chair of the UK Business Angels Association, discussed the impact of the Code: “With an increasing number of our Angel groups signing up to the Code, including a growing number of groups with a strong proportion of women angels, we can see the impact on women founders seeking and finding angel investment across the UK.
“Signatories are attracting an increased level of women founders into their pipeline, whilst, for the first time, deals in women founders have surpassed the number of deals in male founders accessing investment, achieving over half the deals and share of investment from the Angel group signatories.”
Remaining positive despite challenges
Despite the positive impact of the Code, the gender investment gap remains wide, with considerable strains on the market having the highest impact on all-female founding teams.
However, Code partners remain optimistic that expanding the Investing in Women Code to recruit more Limited Partners and CDFIs will have a substantial impact across the finance ecosystem.
Increased engagement with signatories should provide support to those who are still at the beginning of their journey, and recognise those who already lead the way. In partnership with the Invest in Women Taskforce, the Code will work unitedly towards its mission to ensure talented and ambitious women entrepreneurs can access the finance they need to thrive.
Theodora Hadjimichael, chief executive at Responsible Finance, said: “Community Development Finance Institutions (CDFIs) dismantle barriers in access to finance. Over 40 per cent of CDFI lending is to women-led businesses because our sector designs products and services to help us say ‘yes’ to female founders.
“Many CDFIs are longstanding signatories to the Investing in Women Code. We wholeheartedly welcome the extension of the code and are delighted to be a Code Partner for CDFIs. For the financial services sector to meaningfully address women entrepreneurs’ access to tools, resources and finance, we must work together.”
Christine Hockley, managing director of funds at British Patient Capital, added: “As one of the first Limited Partners to sign the Investing in Women Code, British Patient Capital remains committed to supporting the advancement of female entrepreneurship. This includes our most recent €25million investment in fellow Code signatory, Blume Equity, a female-owned and led firm that backs companies tackling climate change.”