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UBS Female Founders

Solutions for the funding gap


There have been numerous studies—and a plethora of media coverage—on the funding gap that exists between women entrepreneurs and their male counterparts. The numbers are stark: in the US, just 2% of investments in startups are for women-led ventures, although 38% of startup founders are women, according to research by the European Investment Bank.1 This reality is even more pronounced for women of color and those in developing countries, and comes at a great cost to gender parity efforts. Because of this funding discrepancy, female entrepreneurs lack equal opportunities to innovate and build successful companies that can contribute to the global economy. Furthermore, there is an abundance of evidence to suggest that women who re­ceive funding develop businesses that perform as well as—or even better than—their male counterparts, which suggests investors are missing out on attractive invest­ment opportunities.2

In our 2021 “The funding gap: Investors and female entrepreneurs” paper, we examined the reasons behind this discrepancy and identified ways this gap can be narrowed. The objective of this digital follow-up publication is to dig deeper into these discrepancies and evaluate the proposed funding gap solutions. In addition, we look to give voice to women entrepreneurs and investors and learn more from their experiences and advice. Together with our other initiatives, we hope this will contribute to narrowing the funding gap. 

Why is this important?

Unlocking the potential of female entrepreneurs would have tangible economic benefits. The Boston Consulting Group (BCG) estimates that equal participation in entrepreneurship would raise GDP by 3–6%, boosting the economy by up to USD 5tr.3 Female entrepreneurs are also more likely to create new jobs, help local economies, and reinvest their earnings into the health and education of their families. Furthermore, startups founded and co-founded by women appear to be better investments. On average, women generate 78 cents of revenue per dollar invested, compared with 31 cents for men, according to BCG research.4 In addition, in 2021, female founders reached exits quicker, taking 6.7 years versus 7.7 years for the market overall.


Bonnie Lyn de Bartok, founder of The S Factor

United Kingdom

Kimberley Abbott, founder of Vested Impact


Michelle Lee, founder of I'm Soul Inc


Tatyana Eliseeva, co-founder of HealthCaters


Investors almost always rely on their network of colleagues and service providers to source financing. Academic re­search has demonstrated that having a strong network in the venture capital (VC) space plays a critical role in deal sourcing, deal syndication, and decision-making.6 Men are much more likely to be part of a social network that in­clude other men, while “most of the non-investing women did not know any female peers or role models who were an­gel investors.”7 This means that male entrepreneurs are more likely to receive—or have access to—relevant guidance from their network, resulting in higher motivation, valida­tion of their thinking and business model, more useful infor­mation around vendors and clients, as well as useful inputs in their business plans. 

The existence of a robust social network is a key determinant of future success. Beyond access to a network, the “like me” effect also influences the funding process, given that the majority of decision-makers are white males.

Network is crucial at all times in a founder journey. It’s about who you know, not what you know. It stands true in my story, because when I first started my company, the people I met helped me make initial investor connections and exposed me to potential hires.


Formal events and networking platforms can facilitate the de­velopment of relationships and social networks that could sup­port female entrepreneurs. Such support networks could guide and motivate women who require funding and help them work on delivering their ideas.

Education around the financing process could potentially help reduce the bias and funding gap faced by women. Equally, boosting women’s understanding of how they may be perceived—and what they can do to improve that perception—are key ingredients to success. Relevant know-how and tips can be shared within a network and through formal events and mentorships. Examples of such tips would be how to optimize ways of communicating the compa­ny’s potential and responses to questions such as including a growth focus in their answers during the Q&A.  

Accelerators can play an important role in providing mentorship, capital, and connections to investors and business partners. However, some research suggests that while accelerators are useful in helping male-led startups raise equity, they are less effective vehicles for female founders.8 As a result, male-led startups can raise up to 2.6 times the equity post-acceleration than startups led by a female founder.8 This suggests that the choice of accelerator is important and that accelerators should pay attention to gender biases. It also suggests that to level the playing field, more should be done across the entire entrepreneurial ecosystem. 

There are different accelerators for different purposes—some focus on investment, some on networking, some on sales. Be sure to understand whether the program aligns with your company's goals.

Leveling the playing field

People’s tendency to like people who look like, act like, or remind them of themselves is referred to as homophily. Homophily frequently manifests itself in the venture funding world, where the overwhelming majority of investors are male (with 70% of these being white males).9, 10 Indicatively, only about 12% of decision-makers at US VC firms are women.11 Among UK VC investment teams, women hold just 13% of senior roles.12 In Europe, 15% of VC general partners are women, having access to just 9% of total assets under management.13 Female representation in emerging markets, excluding China, is only about 8%. China is a notable excep­tion, with 15% female representation, which is above the per­centage for developed countries.14

Venture Capital is primarily a socially driven ecosystem. A majority of the people in VC went into the same set of schools, they move into the same circles—that is why it has been a fairly homogenous profile of VC investors and companies they invest in.


VC firms with female partners are more than twice as likely to invest in women-led enterprises, and more than three times as likely to invest in enterprises with female CEOs.15 Re­search shows that when a woman is on the investment team of a VC firm, that firm is 40% more likely to invest in a company with a woman on its executive team.16

However, female venture capitalists are also more likely to ask growth-focused questions when interacting with male entre­preneurs, and risk-focused questions when interacting with fe­male entrepreneurs.17 This highlights that unconscious bias is also demonstrated by female venture capitalists and puts into question how much can be achieved by focusing only on increas­ing the number of women in VC firms. In our view, investors would benefit from reviewing and debiasing their de­cision-making processes, for example by ensuring that they ask an equal amount of “growth” compared with “prevention” questions to all founders, irrespective of their gender, or by evaluating pitch decks through “blindfold” pro­cesses. In addition, it is useful to provide constructive, action­able feedback to founders.

Furthermore, there is a growing number of funds or incubators that aim specifically to support female founders; however, there are not yet enough of them to make a significant dent in narrowing the funding gap. Many of these funds are new and have a limited track record, which makes it challenging for them to grow. 

What may be a powerful catalyst for narrowing the funding gap is if Limited Partners prioritize increased diversity in their decision-making processes. Limited Partners are investors in venture and private equity funds that usually include foundations, family offices, pension funds, and university endowments. Ultimately, those writing the checks have the power to drive change.  

Finding alternative sources of funding

Traditionally, venture capitalists have calculated that about two-in-ten investments will generate most of a fund’s profits.18 If a fund hopes to achieve a 20% return, then those two-in-10 investments must generate, or return, between 20–30 times the money invested into them. Investors in these compa­nies eventually require an exit, to allow for monetization, ei­ther via an IPO or through a trade sale. Not all target compa­nies fit this accelerated growth path. VC funding is appropriate for certain, but not all companies, as many do not fit this specific high-growth profile. 

It is therefore worthwhile to look at how female founders and leaders of small- and medium-sized enterprises (SMEs) grow their companies. Research suggests that female founders often start their ventures with less capi­tal and seek small or alternative sources of funding, which often comes at a greater cost1

It has been shown that women have greater limitations in accessing debt capital and bank financing than men.19 They usually rely more heavily on family funding, which hurts those who come from low-income backgrounds. But even in cases where funding is obtained from family and friends, women face greater scrutiny than men.1 This highlights that gender bias exists even within family and friends.

Raising debt financing for start-ups is often chal­lenging given these typically have neither a track re­cord, generate steady cashflow, nor own adequate collateral. Nevertheless, on occasion, advance customer cash payments can provide the necessary liquidity for growth and debt fi­nancing. A further option used by start-ups is to monetize the value of customer receivables, allowing them to generate incremental liquidity. These alternative sources of funding have historically proven success­ful for entrepreneurs who choose to build their business slowly and steadily.

Crowdfunding is an alternative source of funding that shows potential. Some research indicates that women are more successful in crowdfunding because they are seen by some as more trustworthy than men.6 Furthermore, there is evidence that women investors prefer women-led projects in a show of sup­port to their fellow entrepreneurs.9

Women are out there supporting each other.


However, other research points to the difference between rewards-based crowdfunding and equity crowdfunding, with equity crowdfunding being likened more to venture capital funding. Recent research suggests that women are more likely to raise funds through a rewards campaign than through equity crowdfunding or venture capital compared to men.20 Potential reasons for these differences include a more equitable investor base, different investor motivations and an alternative decision-making process. Another report identified all-female-led ventures suffered a funding gap compared to those led by men in seasoned equity crowdfunding offerings, but they noted that this gap narrowed for campaigns with more ambitious funding targets.21 This may be because ambitious funding goals signal growth, superior potential and higher quality.22 In settings with high information asymmetry, like equity crowdfunding, bias may be more prominent. This may present itself with women having to provide more information about their company to compensate for the structural barriers and stereotypical attributions associated with being a woman.19 For a more equitable solution, one possibility would be for crowdfunding platforms could ask companies to provide more information in order to reduce information asymmetries that lead to bias. 

A conversation with Gail Wong


Gender lens investor, Singapore

A conversation with Priya Downes 


Founder of Nudea, United Kingdom

A conversation with Trish Costello


Founder and CEO of Portfolia, United States

A conversation with Vicki Saunders


Founder of Coralus, formerly SheEO, Canada

A conversation with Delilah Panio


Capital markets expert and founder of Fortuna Funding, United States

A conversation with Jacqui Hocking 


Founder of VS Story, Singapore

A conversation with Tamara Abdel Jaber


Partner at Amam Ventures, Jordan

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