Investing in women requires representation on both sides of the table.
This year the UN International Women’s Day theme is Invest in women: Accelerate progress. Which is a timely theme for this week’s government u-turn on angel investing rules.
Initially, the government had proposed to increase the minimum salary threshold for angel investing from £100k to £170k, a change that was proposed to protect more ordinary individuals from the risks associated with investing in financial products.
However the unintended consequences of this would have caused damage to underrepresented groups, and in particular exacerbated the gender funding gap by reducing the number of women angel investors.
Why is this important?
Women founders face a number of obstacles in accessing funding. The statistics on funding, as well as the representation on investment committees, in themselves can be a deterrent resulting in fewer women applying and pitching.
Less than 2% of VC funding in the UK goes to women founder teams, and when we take an intersectional lens and review the funding that goes to women teams who are also Black, this number reduces to 0.02%.
Despite some progress in recent years - with an increasing number of signatories for the Investing in Women Code - inequity in this space remains stark:
At the end of last year, Forbes reported that 85.1% of equity investment went to male-led firms,
Level20 reported that only 15% of senior investment professionals in the UK are women,
BVCA found that when women are also ethnically minoritised the number in senior investment roles is 3%.
So how does gender parity improve our economy?
The 2019 Rose Review found that if their potential was recognised, women founder teams could contribute an additional £250bn to the UK economy. Since then, McKinsey published their 2023 data that companies in the top quartile for gender diversity on exec teams are 39% more likely to financially outperform peers, continuing an upwards trend from 15% in 2015.
We need to make sure that the decision makers in investment spaces continue to be more reflective of the founders on the other side of the table. Investment teams rich in diversity will improve opportunities for founders who are women, people of colour, low socio-economic background and more. Diversity will enhance our economies and unlock a wealth of creative potential.
Congratulations to the InvestHER movement whose campaigning secured the angel threshold reversal in the Spring Budget announced this week, which in turn will support the blossoming diversity in successful minoritised-led businesses. Let's continue a trajectory of facilitating entrepreneurs to realise ambitions despite their identity and background.
This piece was written by Hannah Anderton, Senior Associate at Purpose Union.