Fintech tops VC funding list of women-founded firms

Dealroom data shows that fintech companies make up the majority of VC funding flowing to women-founded firms, but gender gaps remain.
8 March 2023

Gender gaps in the tech sector still compromise future digital success. Image credit: Shutterstock Generate.

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“I want the UK to be the best place for anyone – male or female – to start and grow a tech business, so it’s brilliant to see female-founded firms attracting more investment than ever before,” said Michelle Donelan, Secretary of State for Science, Innovation and Technology. Donelan joined UK Prime Minister Rishi Sunak earlier this month to launch a 10-point technology framework, which included a £10 million uplift to the UK Innovation and Science Seed Fund (raising it to £50 million) to grow future tech giants. But building the next generation of technology businesses means addressing the gender gap too. “STEM remains a male-dominated area, both in the jobs markets and at universities,” cautions a recent World Economic Forum report. Research carried out by Dealroom (a global provider of data and intelligence on start-ups and tech ecosystems) on behalf of the Department for Science, Innovation and Technology shows that VC funding raised by women-founded firms is on the rise. But the gender gap remains in the venture-backed tech sector with female founders represented in only 9% of UK unicorns.

The Dealroom analysis, which focuses on the UK tech scene, shows that fintech companies make up the majority of VC funding flowing to women-founded firms. Considering the top 10 rounds for UK start-ups with at least one female founder or co-founder, almost 70% of the funding (GBP 1.989 billion) was centered around fintech. Energy was the next biggest VC funding sector for women-founded firms in the study. Examples listed include Nyobolt (GBP 50 million) – a start-up developing end-to-end ultrafast charging battery solutions – and Hydro Wind Energy (GBP 44.5 million). Over a third of Hydro Wind Energy’s senior team are females, and the cleantech firm – which has offices in London, San Francisco, Dubai and Ireland – is building systems to gather low-cost energy from the sea.

Women founders are having a major impact in other sectors too. According to the Dealroom data, nearly 200 impact start-ups (tech firms developing solutions that address the UN’s Sustainable Development Goals) were founded by women in the UK. And together, these women-founded companies employ more than 8,000 people. However, as highlighted, when it comes to firms with $1 billion dollar plus valuations (the so-called unicorns) there is still work to be done to welcome talent more broadly. “The vast majority of start-ups and funding continues to go to all-male teams,” comments Yoram Wijngaarde, founder of Dealroom. “By focusing on this metric and on upskilling talent across the digital tech sector we should be able to make a difference.”

Tackling gender gap and diversity issues

The study reports that only 13 of the UK’s 144 tech unicorns have at least one woman founder, which – as mentioned – represents just 9% of the total and signposts missed opportunities. At face value, this is not good news for a country focused on growing future tech giants. And to maximize its chances of success, the UK government is supporting a range of initiatives designed to tackle gender gap and diversity issues facing the tech sector.

A first step for UK firms looking to improve their chance of tech success, which is inextricably linked to having a talented workforce, is to sign up to the Tech Talent Charter (TCC). The UK government has supported the TCC since 2016, and the industry-led membership group aims to equip signatory organizations (of all sizes, from start-ups to multinational firms) with the networks and resources to drive diversity and inclusion. On its website, the TCC highlights that failing to address gender gap and diversity issues carries a cost for UK businesses – “With an estimated 870,000 vacancies in digital and tech in the UK, it is clear we are not attracting and including all the available talent.”

McKinsey, a global consulting giant, points out that the business case for diversity, equity, and inclusion (DE&I) is stronger than ever. McKinsey analysts have been following industry trends across a series of reports since 2015, examining more than 1000 large firms based in 15 countries, which provides a valuable perspective on issues worldwide. Interestingly, while average figures suggest that progress in advancing DE&I may appear slow. The story is quite different when you look at performance company by company, which reveals two categories of firms. Firstly, there are organizations that are doing extremely well, particularly at the executive level, based on McKinsey findings. And then there are the companies that are missing out on opportunities and, in the language of the report, ‘should take far bolder action to create a long-lasting inclusive culture and to promote inclusive behavior’.

In the UK, firms with 250 or more employees must report their gender pay gap data, which is published online. There is also the upcoming EU Pay Transparency Directive, which could eventually apply to EU organizations with 100 or more staff. But companies don’t have to wait until they cross that threshold before taking action. In fact, there are many digital tools that smaller firms such as start-ups can use to make sure that their staff are fairly rewarded for their efforts. Figures, a salary benchmarking firm, has a handy 6-step guide for companies that want to get ahead by reducing their gender pay gap. And a Gender Equality Index offered by the French CompTech provider makes it straightforward for firms to compare their progress against similar organizations in the UK and across the EU.