Diversity in Startup Investment

Concerns About The Diversity Of UK Startup Investment

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A survey by co-working space provider Huckletree has highlighted the discrimination many female and ethnic minorities feel when trying to secure investment funding. On the back of this, they have launched a ‘Fairer Funding Now’ campaign to encourage investors to think critically about their own, possibly unconscious, tendencies and commit to finding a solution.

What did the survey discover about UK startup investment?

Speaking to over 200 entrepreneurs in the UK and Ireland, Huckletree discovered that 16% of them had experienced discriminatory behaviour during their search for investment. Of those people, 86% explicitly referred to sexism in their response. 28% of the female startup founders who engaged with the survey stated that they felt they had been discriminated against when pitching for investor funding.

This is not totally unsurprising given the findings of the Entrepreneurs Network report into startup funding success. It states that in 2017 in the UK, only 9% of startup investment went to companies with a female founder or team. That’s £358.4 million, compared to the £3.6 billion received by male-founded businesses.

The picture isn’t that much different across the Atlantic, where only 2.2% of the $85 billion invested by venture capitalists that year went to all-women teams. In contrast, all-male teams secured 79% of that total, $66.9 billion. The other 19% was attributed to mixed gender or unknown gender teams.

Alongside sexism, the survey suggested that racial discrimination is also a significant issue within startup investment. Only 7% of Asian UK startup founders believe that equal opportunities for funding exist, irrespective of background. This rises to 17% for black leaders but falls to 4% for those who identify as mixed race.

Looking at the Huckletree report sector by sector, finance comes off the worst with 41% of those in the industry saying that they had experienced discrimination when looking to secure funding. 32% of those in the technology sector and 27% of those in property also noted such experiences.

From a commercial perspective, the apparent reluctance to invest in female-led startups makes little sense.

US research conducted by the Ewing Marion Kauffman Foundation in 2013, found that female-led teams generate a 35% higher return on investment than all-male teams. Clearly, the lack of investment in female founders isn’t because they fail to then deliver on it.

Ultimately, the failure to invest in diverse startup founders is depriving the UK of exciting and innovative new businesses that can provide original new solutions to the problems we face.

 


 

It’s worrying that Diversity & Inclusion issues still exist around topics such as the above.

It also begs the question as to how the world will embrace D&I across more emerging themes if we’re still struggling with the basics.

Below our Managing Director, James Beazley, discusses whether businesses are overlooking the impact the digital transformation era will have on diversity.

 

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