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by Margaret Taylor
13 March 2024
The path less travelled: Why female entrepreneurs find it hard to succeed in business

Female founders receive a far smaller proportion of business funding than men do | Alamy

The path less travelled: Why female entrepreneurs find it hard to succeed in business

Elaine Galston thought she was onto a winner when, after attending a session run by a group of angel investors, she was invited to stay behind. Keen to secure funding for her nascent business Bettii, she had her pitch all prepared and was ready to seize the moment.

“The woman who asked me to stay asked what sector my business is in and when I said it was femtech she said ‘don’t bother’,” Galston recalls. “She said ‘our investors are all male, pale and stale and they won’t even open your investor deck’. I asked if she wanted me to tell her about it and she said no.”

It is a situation many female entrepreneurs, not just those operating in the women’s health space like Galston, will recognise. A report published by the British Business Bank in 2019 found that for every £1 of venture capital (VC) investment made in the UK, all-female founder teams got less than 1p while all-male teams received 89p. With the research also finding that just 13 per cent of the senior people on VC investment teams were female while almost half (48 per cent) featured no women at all, the cause of the disparity seemed clear: the guys who controlled the purse strings were investing in their own image.

Fast forward to 2023 and research commissioned by the Scottish Government made a similar finding. Compiled by Ana Stewart – a tech entrepreneur who became an angel investor after first floating then selling the design consultancy she founded in 1995 – and Mark Logan – a former Skyscanner executive who currently serves as the Scottish Government’s chief entrepreneur – the Pathways report found that just one in five Scottish businesses are led by women, with female-founded organisations receiving just two per cent of the capital invested here. The participation rate had remained “more or less constant over many decades”, with the authors describing the situation as “unacceptable” and calling it the “denial of opportunity on, literally, an industrial scale”.

Kate Forbes commissioned the Pathways report when she was finance secretary | Alamy

Jackie Waring, the founder of all-female investment groups Investing Women Angels and AccelerateHER, says that opportunity is being denied because, like Galston, many female founders find themselves locked out of investment decisions because the panel they are confronted with doesn’t understand what it is their businesses are trying to do.

“If you have a predominant demographic in any ecosystem it’s almost impossible to escape that bias,” she says. “When the investment community is overwhelmingly male then decision-makers are not necessarily knowledgeable or comfortable with the themes of the female founders who approach them. One example is femtech – mention the menopause and you’ll see how quickly the room empties – but we know female founders who have spectacularly good propositions in the femtech sector.”

For Galston, while such attitudes mean founders are missing out on the opportunity to grow their business, they also mean potential investors are missing out on the opportunity to grow their returns. She points to a report compiled by Coyote Ventures – a Californian venture capital fund that invests in businesses whose products, it says, are designed “to solve problems that disproportionately affect overlooked populations”. It estimates that the women’s health market will be worth $1.2trn globally by 2027 and, with the investment the sector does attract tending to focus on menopause and fertility, the report concludes that on the whole the market is ripe for disruption.

Having previously been chief executive of an engineering business, Galston first became interested in femtech when she mentored two founders whose start-up was producing reusable sanitary pads. The more research she did on the sector, the more she became convinced of its growth potential, and was particularly taken by the environmentally friendly credentials of menstrual cups and discs. She has come up with the prototype for a machine – the Bettii Pod – that can be installed in toilet cubicles to sanitise those cups and discs, offering a solution to a problem many women currently encounter. Despite numerous organisations showing an interest in buying her product – some saying they would take many hundreds of units – and despite her proven track record in business, she has continued to find securing the funding and support to move beyond the prototype stage a challenge.

“I need to raise about £525,000 but it’s really been a mixed bag,” she says. “Scottish Enterprise and Innovate UK have been great and female business groups have been really supportive but while two have said they are interested they’ve also said they need there to be a lead investor before they can invest. With established angel groups you either get turned down straight away with no feedback, which is frustrating, or you have conversations where they say they get it but can’t invest. I spoke to one guy who understood it and thought it was fantastic but was very honest and said the group is all male, chances are they won’t go for it.”  

For Waring the problem Investing Women Angels and AccelerateHER was set up to address is twofold, with women being locked out of securing investment due to male investors’ preferences while women who could invest – women who have had success in business themselves and have the capital and know-how to share – have historically not done so because they haven’t been aware of it as an option for them.

There are far too few female investors and that’s an issue because people tend to reflect themselves in their investments

“Women just didn’t realise they could,” she says. “If you talk to most angel groups they’ll say they’d like to have more female members but they’re not succeeding in attracting them. If you look at financial resource it should be 50-50 – there’s no reason why not but women typically want to feel very competent about investing before they invest. The good bit of that is the benefits that come out of it when they do because women angels are very thorough [but] we really need to see more women investors, not just in the angel community but the venture capital community too. There are far too few and that’s an issue because people tend to reflect themselves [in their investments]. There’s an inbuilt bias.”

It is something the Scottish Government was keen to address with the launch of the Pathways report. When they published their findings last year Stewart and Logan, who had been commissioned by Kate Forbes when she was finance secretary, made a total of 31 recommendations to, they wrote, “address the root causes of female under-participation in entrepreneurship”. The recommendations included providing start-up training and support in a range of pop-up locations to help more women and other primary care-givers access services where they are rather than having to travel to them, and improving access to start-up and growth finance. 

Forbes was on maternity leave when the report was published, but then First Minister Nicola Sturgeon promised to respond to it quickly, given that “fully realising the entrepreneurial potential of women in Scotland will not only promote greater equality in our society [but] will also deliver significant benefits for the economy”. 

In the end it was Neil Gray who accepted the report’s provisions, having been given responsibility for the economy when Humza Yousaf replaced Sturgeon as first minister and Forbes left the government last March. He told parliament the report’s findings were “intolerable” in the wellbeing economy he was “committed to building” and said the government had a “moral and economic duty to meet these challenges head on”. He would, he said, begin immediate work on the report’s implementation, including “creating prestart centres and pop-ups focused on encouraging women to start businesses and providing best in class support to help them develop products, adopt sound commercial strategies and get early access to funding”.

In September Gray announced the launch of a Pathways Pre-Start Fund to “provide support, mentoring and advice services for people thinking about taking the first steps towards creating a company”. In total £1.3m has already been awarded across 20 projects, including Elevator, a community outreach programme for female pre-starts that operates in Moray, Angus and Glasgow, and the University of Strathclyde’s Enabling the Forgotten Women of Scotland programme. The funding provided to each is, given the size of the overall pot, necessarily small and, crucially, none of it is invested in individual entrepreneurs but rather in organisations that provide the support and encouragement part of the equation.    

So while female founders continue to come up with investable ideas there is still a considerable way to go before, as Sturgeon said, their entrepreneurial potential can be fully realised and the significant benefits to the economy can be delivered. Indeed, when she addressed Edinburgh Chamber of Commerce’s recent business awards, Màiri McAllan, who became wellbeing economy secretary when Gray was moved to health last month, told the audience that “there is an enduring gender gap in entrepreneurial participation in Scotland and we must address that”. That, she said, should “provoke us to act”. 

Wellbeing economy secretary Mairi McAlan will take the Pathfinders plan forward | Alamy

Organisations themselves have begun rising to the challenge, with AccelerateHER, CivTech, CodeBase, Deloitte, Eos Advisory, Scottish EDGE and the Scottish National Investment Bank all signing the Pathways Pledge in February. As part of that they have committed to implementing their own actions using the Pathways report as their manifesto for change. It is not, Stewart says, so much about bringing the report’s recommendations forward but rather about highlighting what still needs to be done. “It’s about each player committing to positive actions that have an impact at a local level, driving behavioural change, influencing others including government to embrace the recommendations,” she says.

For its part, the government has pledged a further £1.5m to help bring forward the Pathways recommendations, with the expectation that pre-start centres and pop-up business supports will be up and running this year. Promises to “increase the availability of flexible childcare” and “build a system of school-age childcare and develop a funded learning and childcare offer for one and two-year olds”, both of which are seen as essential in giving women the freedom to pursue their entrepreneurial ideas, are at varying stages of implementation. 

They are, in any case, baby steps when it comes to achieving Pathways’ overall goal. Meanwhile, the government’s National Strategy for Economic Transformation (NSET) – the giant leap on which much of the Pathways plan relies – appears to have stalled, with the Auditor General for Scotland recently warning that the 10-year blueprint, which launched in 2022, lacks the political leadership and targets needed to succeed. That is a problem for those waiting for the “greater economic opportunities” the Pathways programme is expected to unlock, given that the government has stated that the two strategies will be “long-term” and “aligned”. Crucially for Pathways, NSET is expected to be “inclusive by design”.

When she was setting up Investing Women Angels a decade ago Waring did some research on how well represented women were in the investment community. The data she had to go on was scant, but she was able to establish that between 2005 and 2015 there had been a “10-year period of stagnation”. That chimes with the finding of the Pathways report that the participation rate for women seeking funding had remained “unchanged over many decades”. Talk of moral duties and transformational change is one thing, but unless solid action is taken things may well continue to stagnate for many more. 

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