Resilience and Recovery, a new report from the Female Founders Forum produced in partnership with Barclays, combines discussions with female founders and original data analysis, to identify the reasons why female entrepreneurs have been disproportionately impacted by the COVID-19 pandemic.
Headline findings
COVID-19 has posed significant challenges to most companies, but recent data from Beauhurst indicates that female-led, high-growth companies have been disproportionately impacted throughout the pandemic. However, despite this impact, more than 60 per cent of female-founded, equity-backed businesses are now operating with minimal disruption to their business, showing that female-led businesses are fighting back.
From our discussions with female founders and data analysis, we believe that there are a number of reasons why female entrepreneurs have been disproportionately impacted by the COVID-19 pandemic:
Women have often had to take on greater childcare or unpaid work burdens during lockdown, which will have impacted female entrepreneurs.
Women are more likely to start businesses in sectors which have been worse affected by the pandemic, such as retail, hospitality, and leisure. Also, female-founded businesses are less likely to be tech or IP-based businesses (28% and 33% for all equity-funded startups), which have been most likely to find opportunities for growth as a result of the pandemic.
In the lead-up to the pandemic the equity funding gap has persisted. According to Beauhurst data, in the past eighteen months, the average raise for startups with at least one female founder was less than half of the average raise for startups with all-male founders. In 2020, just 13% of total equity investment went to female-founded startups and when it did, it tended to be for smaller amounts.
Women are less likely to seek external finance. However, once they received an initial investment, female-founded startups were just as likely to raise additional rounds of funding compared to non-female-founded firms.
Positive action has taken place since lockdown to remove these barriers.
By August the outlook for high-growth female- founded businesses had improved. Since then the improvement has continued and as of 14 September, less than 2% of female-founded businesses tracked are in critical condition.
The Future Fund convertible loan scheme, aimed at UK startups which have raised third-party equity investment, has helped to address disparities in equity funding. Of the 590 businesses to receive a convertible loan agreement through the Future Fund, companies with all-female or mixed-leadership teams have received the vast majority share of funding (83%).
Furthermore, mixed-gender senior leadership teams have received the most funding with 410 companies receiving an average of £1.1m each. There were 147 all-male teams which received an average of £640,000 per company. Only 8 of these companies were led by all-female teams, but they received an average of £900,000.
Financial institutions have also been encouraged to sign up to HM Treasury’s Investing in Women Code which has helped to address the gender funding gap.
This scheme commits investors to support the advancement of female entrepreneurship in the United Kingdom by improving female entrepreneurs’ access to tools, resources and finance from the financial services sector.
Signatories are required to provide HM Treasury with data on female-led businesses to be collated and published on an aggregate and anonymous basis.
Since the launch of the Future Fund more than 30 venture capital firms and angel groups have become signatories to HM Treasury’s Investing in Women Code.
It is important that governments and people who work with female entrepreneurs take an interest in resilience, so female founders are better prepared for future crises.
Resilience is an important feature both during crises and after they are over. Resilience makes it more likely that a business will survive and succeed in the long term. Research into the impact of the 2008 financial crisis found that companies which were able to gain a lead during the recession were still, a decade later, in the top quintile of performers for their sector.
Additionally, some changes due to the pandemic may benefit female founders in the long run. For instance, the rise of remote working may make it easier to balance childcare alongside running a business.
Key Recommendations
If we are to see a full and dynamic recovery from the recession we need as many entrepreneurs as possible to start businesses and create new jobs. In practice, this will require collective efforts to remove the barriers which have held back female entrepreneurs. Resilience and Recovery sets out key recommendations in a range of areas to support female entrepreneurship.
Unequal Responsibilities
Women often take on a disproportionate amount of unpaid work. The government should acknowledge the extra burden female entrepreneurs face and create policies which make it easier for them to run businesses despite this.
Statutory Shared Parental Pay should be increased so it is equivalent to Statutory Maternity Pay.
Tax free childcare should be extended to more flexible alternatives like app-based intermediaries.
Train companies should offer more flexible alternatives to the traditional season tickets.
Networks
Women are less likely to know other entrepreneurs personally, and more likely to value formal networks.
Schemes such as the Small Business Leadership Programme and Peer Networks should be a key part of business support moving forward and should be actively promoted towards female entrepreneurs.
HM Treasury and the British Business Bank should ensure all Start Up Loan recipients are provided with an offer of mentoring and consider providing additional aftercare support once the loan has been repaid.
Sector
Men and women start businesses in different sectors and women are less likely to found STEM businesses which have been less impacted by the pandemic.
Government should gather more data on STEM drop-off rates.
Government should draw attention to support, and potentially subsidise initiatives which teach people to code.
Government should champion and support organisations which encourage girls to pursue careers in STEM and facilitate information sharing between them.
Exporting and Diversification
Businesses which export are more resilient because it means they are less reliant on a single market for revenue.
The Department for International Trade has plenty of resources to help businesses export. To improve uptake, when the government works with SMEs through other schemes they should direct them towards this exporting advice.
The Department of International Trade should publish statistics about the gender breakdown of SME exporters.
External Finance
Women start businesses with less money than their male counterparts and are less likely to raise equity finance which is usually the most lucrative form of funding available to businesses.
HM Treasury should continue to publish data with gender breakdowns for business support programmes. To identify gaps in support, Ministers should engage directly with female entrepreneurship groups when designing future support.
Organisations signed up to HM Treasury’s Investing in Women Code should commit to meeting with female entrepreneurship groups and nonprofits such as Diversity VC to identify gaps in their processes that may lead them to pass up on opportunities to invest in female-led businesses.
VCs should commit to developing a pipeline of female talent to address the fact almost half (48%) of investment teams have no women at all.
Resilience, Crisis Planning and Speed of Response
Crisis plans make organisations more resilient when faced by disasters.
When designing new business support schemes, the Government should incorporate elements of crisis planning into the application process.
Organisations which work with SMEs should raise the issue of crisis planning where it is relevant and support their development.
Case Studies
In the crisis, we have heard inspiring stories of female entrepreneurs adapting to the challenges of the pandemic.
Charisse Smith is the CEO of CMe Media. She knew the pandemic was not a time to “shrink and take stock” and has instead used it as an opportunity to expand and grow the business with the help of a CBILS loan from Barclays. She has decided to set up satellite businesses in other parts of the country. The central CMe Media team will provide the data analytics but the satellite offices will lead on their own sales.
Tania Boler, the co-founder of Elvie has realised that they do not need to do so many meetings and inspections in person. They now do meetings virtually and she has found a way to inspect labs using GoPros on people’s helmets. She says they can greatly reduce the number of flights they need to take and become a net-zero company.
Fiona Nielsen is the founder of Repositive. She says that since working from home worked so well for them during lockdown, she sees no reason for everyone to have to live in Cambridge, which is an expensive place to be based. They have agreed to continue as a fully remote company and given up their lease on their office.