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Why do women receive less startup funding compared to their male counterparts?
This year's theme for International Women’s Day 2025 Accelerate Action, underscores the urgency of breaking systemic barriers that hinder gender equality. In the entrepreneurship and investment space there remain significant disparities between men and women when it comes to business opportunity.
Acceleration is a powerful and essential call to action, but it's crucial to determine exactly what headway must be accelerated in the investment space.
Female entrepreneurs are significantly less financially backed than male entrepreneurs during early funding. wIn Britain less than 3% of VC funding went to female founded start ups in 2023. And Sifted reported a downturn trend of 12% in 2024. We must therefore caution that acceleration is happening but possibly in the wrong direction.
The barriers to investment for women in the investment space are multifaceted.
Firstly, understanding the blunt figure: women do not receive the same level of funding as their male counterparts. One of the most significant barriers women entrepreneurs face is securing financial investment. Women-owned businesses receive disproportionately low levels of venture capital (VC) funding. According to the World Bank, women-led businesses receive less than 3% of global venture capital, with the figure dropping to 2% in the UK. In contrast, all-male teams receive 89% of funding.
Studies indicate that women entrepreneurs are more likely to seek lower amounts of seed funding than men. Research from Enterprise Nation found that women are 20% more likely to seek under £10,000 in funding, and only 2% of women plan to raise over £1 million compared to 5% of men. This cautious approach to financing reflects a broader trend in which women are more risk-averse due to societal expectations, caregiving responsibilities, and a lack of confidence in the male-dominated investment landscape.
However, more nuanced research suggests that the issue is not a lack of confidence or belief among female entrepreneurs, but rather an investor community that lacks confidence in them. Dana Kanze, a doctoral fellow at Columbia Business School, was once an entrepreneur. When she and her male co-founder tried to raise money for their mobile tech company at TechCrunch Disrupt, they got very different questions from potential investors. Even though the two had similar titles, went to the same school, and both had 10 years of experience in finance.
Kanze noted a clear difference in the way she and her male co-founder were questioned during their pitch to investors. She often faced inquiries about potential risks and obstacles, what she later termed “prevention” questions, whereas her co-founder was more likely to be asked about opportunities and growth, which she refers to as “promotion” questions. In one scenario, there is an immediate need to defend against worst-case scenarios, while in the other, there’s an opportunity to discuss future success and share a broader vision with investors.
Her study, featured in the Academy of Management Journal, examined the link between these questioning patterns and entrepreneurs’ fundraising success. The research suggests that if women were asked the same opportunity-focused questions as men, they would raise just as much funding. Therefore, disputing the claims that it is women’s own lack of confidence holding them back from investment. In fact, the findings suggest that the real issue lies in investors lacking belief that a female entrepreneur has built a company with financial potential.
Kanze suggested two ways to address the problem. The first is straightforward, investors should ask the same questions of both men and women. The second is for female founders to reframe their responses, focusing on promotion and future growth rather than becoming defensive, even if that’s what they’re directly asked.
Gender bias continues to affect women’s ability to succeed in investment and business. A 2024 survey by Code First Girls found that 40% of female entrepreneurs reported experiencing gender-based discrimination, and 61% believed stereotypes were significant barriers to senior roles.
Overcoming gender bias is a complex challenge that requires untangling deeply ingrained systems that benefit those already in positions of power. Women support women, and men support women, yet the leadership and networks offered to women are not as great as those accessed by men.
The scarcity of women in high-profile leadership and investment roles can discourage aspiring female entrepreneurs. Only 10% of Fortune 500 CEOs are women, with just three being Black women. Representation matters, and the lack of visible role models limits mentorship and networking opportunities for women looking to enter the investment space.
Networking is crucial for accessing investment and business opportunities. However, many investment networks remain male-dominated, making it difficult for women to break in. Research indicates that women are more likely to seek financial advice from people within their circles rather than online resources, where investment knowledge is traditionally tailored to men. Again reducing their access to crucial support.
Emmie Faust, an experienced entrepreneur and angel investor, founded Female Founders Rise. The organisation provides resources such as coaching, marketing advice, funding support, and networking opportunities to women. Through its initiatives, Female Founders Rise seeks to create equal opportunities for women in the entrepreneurial ecosystem, recognising the significant benefits that female-led businesses bring to society, the economy, and the environment.
In an interview Faust emphasised the importance of networks, “We should champion women in business. Be there as a support, celebrate their wins, share their posts on LinkedIn, or whatever it might be. Showing female founders that you’re there and that you’re a supporter makes a massive difference.”
“Lots of people obviously don’t have the finances to invest in founders, but what they can do is they can buy their products, they can hire their services. They can make sure that they’re diversifying their supplier list.”
Anna-Sophie, a co-founder of Female Invest, argues that it is the lack of financial education given to women that is holding them back. Female Invest aims to democratise financial education globally, welcoming individuals from all backgrounds to engage with and understand the world of money. Their mission is to provide a one-stop universe for financial knowledge and learning, enabling members to make informed decisions about their finances.
The reasons for the investment gap are primarily down to negative stereotypes around women’s relationship with money, Anna-Sophie said. There are these stereotypes that “women are bad at maths and women are big spenders”
One major issue is the differing financial advice given to men and women, women are often encouraged to save, while men are urged to build wealth. Research also indicates that women are more likely to seek investment advice from other people, whereas men tend to turn to the internet as their first source of information.
According to Anna-Sophie, the financial world has historically been built by and for men, with communication strategies primarily targeting a male audience. Female Invest aims to change that by empowering women to navigate finance with confidence.
“A lot of what we do is about creating a safe space… We know that many women don’t feel they can trust financial institutions,” she said.
“We took on the challenge of educating women and closing the confidence gap—we just need to communicate financial information differently.”
Anna-Sophie Hartvigsen in conversation with Grace Beverly, CEO of Tala, said that “Today we live in a world where climate change is hitting, we have so many social problems, and women just don’t have a seat at the table to the same degree. But what we do have is significant unprecedented financial power, we are more educated than ever before, we make more money than ever before and if we use that money as power by investing.. Then it has potential to create change like we have never seen before”
Equality is for the benefit of all.
Research indicates that startups with at least one female founder generate 63% higher returns compared to all-male teams. Additionally, female-led businesses produce twice the revenue per dollar invested, showcasing their strong financial performance.
Addressing the funding gap could have a substantial impact on economic growth. Studies suggest that if a women started and scaled businesses at the same rate as men, the UK economy could grow by £250 billion. On a global scale, investing in female-led companies at the same level as male-led businesses could increase the economy by 3-6%, adding approximately $5tn.
Despite progress in gender equality, women continue to face significant barriers in the investment space. Limited access to funding, gender bias, lack of role models, and restricted networks all contribute to the underrepresentation of women entrepreneurs. However, by implementing targeted strategies—including improving access to capital, addressing bias in investment decisions, expanding mentorship programs, and promoting inclusive policies—women can be empowered to lead in business and investment.
International Women’s Day 2025 serves as a reminder that accelerating action towards gender equality requires collective effort. Breaking down barriers for women in investment is not just about fairness; it is an economic imperative that can drive innovation and growth.
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