Female founders giving up more equity to VCs than men

A report has found women are giving away 10 per cent more of their share to VCs than their male counterparts

Women who seek equity finance from VCs are having to give up more equity than men, says research.

J.P. Morgan Private Bank and Beauhurst identified 5,142 female-founded companies that owned on average 57.7 per cent of their business before going out to raise money. After they sold a stake, they retained 32.9 per cent.

Male-founded companies, on the other hand, held on average 40.4 per cent before external equity funding, and still held 27.1 per cent afterwards.

In short, it means that overall women are giving up 43 per cent of their existing share for equity while men are giving up 33 per cent to VCs.

Despite this, female-founded UK businesses attracted a record £5.1bn investment in 2021.

Beauhurst identified 10,647 high-growth businesses led by a woman or have a majority female management team, creating £84.7bn of sales and employing close to 700,000 people.

Women are also starting a record number of new companies. Research for the Rose Review this year found more than 140,000 start-ups were started by all-women teams in 2021. According to a ScaleUp Institute report, the number of women starting scale-ups has also risen by a third since 2020.

The annual Top 200 female-powered companies report was topped by make-up brand Trinny London, which has a workforce made up of 85 per cent women.

The list mainly consists of healthcare, clothing and ecommerce businesses.

Charlotte Bobroff, UK senior advisor to women entrepreneurs at J.P. Morgan Private Bank, said: “The rate at which women own less of their companies as equity investments increase is almost twice that of men, a 25 per cent reduction compared to 13 per cent. This reflects several dynamics affecting female-powered businesses, including a more challenging fundraising landscape and a lack of resources, exacerbating the effect of equity financing.”

Catherine Lewis La Torre, British Business Bank CEO, told Growth Business: “There are structural factors at play that hold women back when they are looking for finance. We also know however that diversity is good for business and that’s why, as the UK’s development bank, the British Business Bank aims to break down barriers by improving access to finance for all entrepreneurs.

“The findings reported provide valuable new data which can help us identify where further measures are needed to improve outcomes for female-led businesses.”

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Dom Walbanke

Fred Mann

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...

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