De-coding the UK’s Gender Funding Gap

Introduction 

With International Women’s Day celebrations and events taking place throughout the month, March is a great time to reflect on both the progress that’s been made in supporting female entrepreneurship as well as the barriers that remain. Despite the growing number of women founding innovative companies, access to capital continues to be one of the biggest challenges facing female founders.  

The statistics are well known. In the UK, only around 2% of equity investment goes to companies founded solely by women. While mixed-gender teams receive roughly 12–15% of total funding, meaning the vast majority (over 80%) of venture capital continues to flow to all-male founding teams. 

These figures show a persistent and well-documented issue: the gender funding gap.  

But beyond the questions of fairness, the implications are much broader. This represents a huge missed economic opportunity.  

Missed Opportunity  

Multiple studies have shown that female-founded companies often outperform relative to the capital that they receive.  

• BCG reports that startups founded or co-founded by women generated 78 cents in revenue for every dollar of funding compared with 31 cents for male founded startups. 

  
  

• First Round Capital analysed 10 years of portfolio data, finding that companies with at least one female founder performed 63% better than all-male founding teams  

  
  

• Ewing Marion Kauffman foundation found that female-founded companies generated 35% higher return on investment than male led teams. 

• PitchBook’s 2024 analysis found that startups founded by women demonstrate stronger exit performance, reaching exit around six months faster on average, with a median time to exit of 7.9 years compared with 8.5 years across the wider startup population. 

  
  

Why This Gap Still Exists 

Despite these clear stats of female founded companies performing  well, and increasing awareness of the issue, this gap is proving difficult to close for a number of reasons.  

VC is a highly network driven industry  

Many investments are sourced through existing relationships which makes barriers to entry very high. Investor networks and founder communities have historically been male-dominated and as a result female founders often have less access to the informal networks where many opportunities originate. 

A lack of gender diversity among investors 

Only 13% of senior teams in UK VC firms are made up of women and 48% of firms have no women at all.  Since women represent such a small minority of decision makers across venture capital firms, this can influence how investment opportunities ae identified and evaluated. Research has shown that investment teams with greater gender diversity are more likely to back female founders and identify opportunities across a broader range of industries and backgrounds.   

For example, studies show that VC firms with at least one female partner are significantly more likely to invest in female led startups, and female investors are twice as likely to fund female founders compared to their male counterparts.  

Sector concentration doesn’t help  

Equity funding has historically focused on industries such as fintech, enterprise software and deep tech. These are fields where female founders remain further unrepresented.  

Investors also tend to favour businesses with repeat founders who have previous success stories. While this can help de-risk investment decisions, it also reinforces existing funding patterns. 

Beyond VC: Expanding Access to Growth Capital  

While the gender gap in venture capital is well-documented, far less attention has been paid to how other forms of growth capital are distributed. As startups scale, many increasingly rely on a broader mix of funding, including venture debt and other forms of non-dilutive capital. 

These alternative financing tools can play an important role in supporting high-growth companies between equity rounds and providing additional pathways for founders to access capital as they scale. 

At Nighthawk Partners, increasing access to capital for female founders is something we’re actively working towards. Currently, 31% of companies supported through our loan book are female led.  

While this is still some way from where we ultimately aim to be, it represents a significantly higher proportion than the share of venture capital funding that goes to female-founded businesses. 

This highlights the potential role that a broader funding ecosystem, incorporating both equity and alternative financing, can play in helping address structural funding disparities.