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Female founders can drive economic growth

By Elizabeth Pirrie, CEO of AccelerateHER

Elizabeth Pirrie - Business Express
Elizabeth Pirrie

This is Global Entrepreneurship Week, where we celebrate and empower entrepreneurs in countries and communities throughout the world. Despite a rise in the number of businesses founded by women in the UK, it’s important we use this event as a platform to address the on-going gender imbalance in entrepreneurship. 

The UK has taken some major steps forward in addressing gender inequality, but there is still a long way to go in that battle including within the world of business where female company founders remain significantly underrepresented compared to their male counterparts. 

Last year’s Pathways report, published in Scotland, set out the scale of the challenge. While the report is focused on the Scottish entrepreneurial landscape, its core findings are relevant to the entire UK. Co-written by established female founder Ana Stewart and Scotland’s Chief Entrepreneur, Mark Logan, the report highlighted how just one in five Scottish businesses are currently led by women and reminded us of the long-standing barriers to institutional investment with female-led currently securing just two percent of available funds. 

It’s vital that we tackle this gender gap in entrepreneurship in all parts of the UK, partly to deliver a fair and balanced society, but also to ensure we grasp the opportunity this presents for economic growth and prosperity. 

We need to build on the positive momentum we’re seeing for female entrepreneurship. Data from Companies House showed that 140,000 businesses were started in the UK by women in 2021, compared to just 56,000 in 2019. We must leverage this growth to create new role models who will influence more women to set up their own business. 

We must also raise further awareness across the investor community about the advantages of backing female-founded companies using the compelling evidence that shows they deliver a higher financial return compared to male-led start-ups. US research from the Boston Consulting Group and MassChallenge showed how start-ups that were founded or cofounded by women generated 10% more in cumulative revenue over a five-year period compared with male-founded companies ($730,000 compared with $662,000).  

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The study also found that companies founded or cofounded by women delivered a better return for investors. For every dollar of funding, female-founded start-ups generated 78 cents, while those founded by men generated just 31 cents.

In light of such findings, we need to address why women are finding it such a challenge to secure the investment they need to scale up their companies. One of the issues is the different approach taken by females in how they present their businesses. While male entrepreneurs will typically be more bullish in setting out revenue forecasts to investors, women tend to base their projections on thoroughly researched worst case scenarios which may be far more realistic but could be perceived as lacking in ambition. This careful, forensic approach to financial management should, however, be touted as a strength not a weakness. 

Another issue impacting on female founders is that they are typically presented with ‘preventative’ questions by potential investors. These focus on losses, safety and security – such as ‘how will you hang on to your existing customers?’ It’s important that female entrepreneurs are better supported to handle such objections and flip these types of inquiries into ‘promotional’ responses focused on growth, gains and advancement, the theme of questioning that male founders typically encounter.

The research about the financial performance of female-led companies sits alongside other studies which highlight the positive impact of having more women operating in senior levels of business.  A recent report from McKinsey gives some strong insights into how diversity at the top level has improved companies’ financial results. It found that firms with strong female representation on their boards were 28% more likely to outperform their peers, while those with gender-diverse executive teams were 25% more likely to outperform.

These findings need to be continually amplified to help further influence the investor community. The currently modest levels of investment into female-led businesses often (but by no means always) comes as a sort of well-intended ‘social obligation’ but that needs to change. As the research clearly shows, female-founded companies can stand very firmly on their own two feet. We must therefore promote the strong financial case rather than the social box-ticking in backing such businesses. 

As well as campaigning to raise the levels of investment into female-founded companies, groups like ours are giving women access to training, learning events, and helping them to expand their business networks. AccelerateHER is proud to have built a community of over 6000 female founders since its inception. Hundreds have benefitted from mentoring by business angels while finalists from our awards programme have secured more than £50m in investment. 

NatWest reported last year that achieving female parity with men in opening and scaling businesses would add £250bn to the UK economy. That underlines the need for everyone to work together to increase female entrepreneurship.  As we celebrate all forms of business creation during Global Entrepreneurship Week, it’s important that we put extra emphasis on growing the numbers of female founders as it will deliver economic benefits for all.

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