Sophie Jarvis is Programmes Director at The Entrepreneurs Network.
On International Women’s Day, Liz Truss and Rob Jenrick ordered a review into the barriers that female founders face in acquiring finance.
Truss twinned this announcement with positive and practical messages about female entrepreneurship via a flurry of Instagram posts. The day culminated in a reception at Number 11 with the ‘lobby ladies’ and high-profile businesswomen from around the country. It was reminiscent of the sort of event we saw under David Cameron.
Under the reign of Cameron, the business PR campaign never stopped, with the the doors of Downing Street regularly flung open to Britain’s entrepreneurs. Now, under Theresa May, we’re starting to see a return of the Conservative Party as a party that “gets PR”: Truss’ instagram is quirky, comical, and self-aware, and Michael Gove has transformed DEFRA into a semi-automatic PR rifle that has treehuggers swooning.
Flying the flag for female entrepreneurship is another smart PR move for the Conservatives, but a PR campaign around female entrepreneurship isn’t just good for the Party, it would also be good for the economy. So what’s the actual problem that needs solving?
A report by the Female Founders Forum recently found, with the help of Beauhurst data, that between 2016 and 2017 the total amount of equity funding raised by male founders has increased by 55 per cent, while the amount raised by female founders decreased by 0.1 per cent – female founders’ share of capital decreased from 14.9 per cent of the total in 2016 to 8.7 per cent in 2017.
Some progress has been made though, with the total number of equity deals secured by female founders increasing. And Monica Kalia, co-founder of Neyber, raised £143.5 million in 2017 – three times the highest amount raised by a female founder in 2016.
So why is there an overall funding gap? Well there’s strong academic evidence suggesting unconscious gender biases at pitching. For example, a report by Harvard Business Review shows that men and women are asked different questions when pitching for funding. When quizzed about projections, men are often asked: “What major milestones are you targeting for this year”, whereas women are asked “How predictable are your future cash flows?”
Also, women are setting up different businesses to men: women are more likely to set up lifestyle businesses, whereas men are more likely to set up tech businesses. By necessity, these have different funding needs. Combine this with a heavily male-dominated venture capital industry and it’s no wonder there’s a disparity. A report by Diversity VC shows us that only 13 per cent of investors are women. Given that women are three times more likely to invest in a company with a female founder than a male founder, 13 per cent is a worryingly low figure.
It’s a complex problem, so there’s no simple policy lever that will close the gap. However, this doesn’t mean we’re powerless to make a difference. Collecting data on growth businesses would provide policymakers with stronger evidence on female entrepreneurship. The US and Germany invest in this and it helps them better target market failures – otherwise we risk wasting taxpayers’ money addressing these too broadly.
The Government should encourage venture capital firms to learn from the strides investment banks, law firms, and the medical profession has made at recruiting women. The legal profession is now at 27 per cent of female partners. There is still some way to go, but with more women than ever going into law this gap is expected to close over the coming years.
For their part, entrepreneurs should engage with the Government’s recently announced review into women’s access to finance, to be led by the British Business Bank. And all Government departments should follow Truss in opening up their doors to Britain’s best and brightest innovators – male and female – as well as hosting regular round-tables with the venture capital industry.
More data collection around girls entering STEM and information on drop-off rates by age should also be collected. We already know the take up is low in higher education, so in the meantime the Government should be unequivocal about the advantages of taking STEM subjects, as well providing a clear messaging around the sectors that offer the most pay for employees and growth for entrepreneurs.
Hour of Code was a programme launched in 2013 under Cameron, where children were invited into Number 10 to learn how to code. This is exactly the sort of endeavour May and her party should be getting behind. PR goes a long way to inspiring people – that’s why companies spend so much on advertising.
Through privatization, deregulation and tax reform, Margaret Thatcher made the Conservatives the party of business, while Cameron modernised this message to appeal to a new generation of entrepreneur. If the Tories are to remain the party of entrepreneurship, they must channel both Thatcher and Cameron to make Britain the best place in the world to start and grow a business, and start by helping unleash the untapped potential of female founders.