The Investing in Women Code: A Catalyst for Change in UK Venture Capital
The UK’s Department for Business and Trade has made significant strides in promoting female entrepreneurship through the Investing in Women Code. This initiative, which has garnered the attention of venture capital fund managers, aims to bridge the funding gap that has historically hindered female founders. Recent data reveals that signatories of the Investing in Women Code are more likely to invest in female-led businesses, marking a positive trend in the venture capital landscape.
A Promising Shift in Investment Trends
According to the latest annual report from the Investing in Women Code, nearly one-third (32%) of all venture capital deals made by signatories involved female-founded companies last year. This figure surpasses the market average of 28%, indicating that the Code is effectively encouraging more investments in women-led ventures. This marks the fourth consecutive year that signatories have outperformed the broader market, showcasing a sustained commitment to supporting female entrepreneurs.
The Birth of the Investing in Women Code
Launched in 2019, the Investing in Women Code was a direct response to the findings of the Rose Review, which highlighted the lack of funding as a significant barrier for women looking to scale their businesses. The Code aims to enhance female founders’ access to essential tools, resources, and finance from the financial services sector. By fostering an environment conducive to female entrepreneurship, the initiative seeks to empower women and stimulate economic growth across the UK.
Insights from Industry Leaders
Louis Taylor, CEO of the British Business Bank, emphasized the importance of the Code in promoting equity and inclusion within the venture capital sector. “While some progress has been made across the venture capital sector to improve access to finance for female founders, there is still a huge amount more to do,” he stated. Taylor’s remarks underline the ongoing challenges that female entrepreneurs face, despite the positive trends observed among Code signatories.
A Growing Network of Support
The Investing in Women Code has attracted over 250 organizations, including prominent partners such as the British Private Equity & Venture Capital Association (BVCA), UK Business Angels Association (UKBAA), and UK Finance. This growing network reflects a collective commitment to increasing the flow of finance directed toward women-led businesses. The collaboration among these organizations is crucial for driving systemic change in the investment landscape.
The Role of Diversity in Investment Committees
The latest report highlights that diversity within investment committees significantly improves outcomes for teams with female founders. Angel groups with over 15% female investors made 57% of their investments in teams with women founders. This correlation suggests that increasing female representation in investment decision-making roles can lead to more equitable funding opportunities for female entrepreneurs.
New Signatories and Their Impact
In 2023, 30 new venture capital signatories reported their investments for the first time, revealing a higher share of deals directed toward teams with at least one female founder. These new signatories allocated 42% of their deals to female-led teams, a remarkable 14% higher than the market average. This influx of new signatories indicates a growing recognition of the value that female entrepreneurs bring to the business ecosystem.
The Challenge of Angel Investment Disparities
Despite the positive trends, the report also highlighted some concerning disparities. The average amount of angel investment in all-female teams was found to be 50% lower than that in mixed-gender and all-male teams. This stark contrast underscores the ongoing challenges that female founders face in securing adequate funding, even as the Investing in Women Code makes strides in promoting gender equity.
Optimism for Future Growth
The Investing in Women Code partners remain optimistic about the future. They believe that expanding the Code to recruit more Limited Partners and Community Development Finance Institutions (CDFIs) will have a substantial impact on the finance ecosystem. Increased engagement with signatories is expected to provide vital support to those at the beginning of their entrepreneurial journey while recognizing those who are already leading the way.
The Role of Community Development Finance Institutions
Theodora Hadjimichael, chief executive at Responsible Finance, highlighted the importance of CDFIs in dismantling barriers to finance for female entrepreneurs. With over 40% of CDFI lending directed toward women-led businesses, these institutions are uniquely positioned to support female founders. Hadjimichael’s insights emphasize the need for collaboration within the financial services sector to ensure that women entrepreneurs have access to the resources they need to thrive.
Commitment from Limited Partners
Christine Hockley, managing director of funds at British Patient Capital, reiterated the commitment of Limited Partners to advancing female entrepreneurship. Hockley noted their recent €25 million investment in Blume Equity, a female-owned firm focused on addressing climate change. This investment exemplifies the growing recognition of the importance of supporting women-led ventures in tackling pressing global challenges.
The Investing in Women Code represents a significant step forward in addressing the gender investment gap in the UK. By fostering a culture of inclusivity and collaboration, it aims to empower female entrepreneurs and drive economic growth, paving the way for a more equitable future in the business landscape.