There has been significant progress in levelling the financial landscape for women over the last 50 years. Businesses, particularly in their infancy, rely on debt, and so it would have been near impossible for a woman to have started her own business prior to 1975 when she could not access credit or open a bank account in her own name.
Times have changed and a record high of new businesses are now led by women (20%), but women need continued support to ensure their businesses thrive.
As a Partner in Michelmores' Commercial team, I regularly advise innovative and disruptive businesses at all stages of their business lifecycle on their key legal needs. I am also the co-lead of MAINstream, a network of angel investors who deploy capital to early stage and growth businesses. While we see a reasonably even split of male and female founders that are looking to raise capital and bring on board angel investors, MAINstream is (much like the rest of this country) still dominated by white, male, middle-aged investors. The UK Business Angels Association reports that just 14% of all angel investors are women, and the gender composition of MAINstream is broadly in line with this national average. It is important to address this discrepancy because women are likelier to invest in women¹. Female entrepreneurs identify market gaps and opportunities that their male counterparts may miss, and female investors are more likely to recognise, understand and see the growth potential of those opportunities. In 2018, the Rose Review identified the potential to contribute £250 billion to the UK economy by supporting female entrepreneurs and providing access to resources that female entrepreneurs were being denied. Different people move in different communities and have diverse lived experiences – bringing unique ideas to the table as a result.
Female entrepreneurs identify market gaps and opportunities that their male counterparts may miss.
The number one challenge for female founders is access to funding. According to the British Business Bank, for every £1 of equity investment that was made in the UK in 2021, all-female founded teams received just 2p, while all male-led teams secured 84p in every £1 (more than female and mixed gender teams combined)². This discrepancy is remarkable and it cannot, unfortunately, be explained away without reference to some form of bias (whether that is unconscious, societal, or otherwise).
Another challenge to face female founders is a shortage of female role models and an absence of a support network that has trodden the path of female entrepreneurship. Female-founded businesses are on the rise now, but they have a huge amount of catching up to do when compared to their male counterparts. When women were granted the right to access credit and open a bank account in 1975, Companies House was already 130 years old!³ There is a shortage of female entrepreneurs demonstrating their success to the next generation of female business owners. That will change over time provided we support the growth and success of the current generation of female founders.
The lack of transparency and accessibility of finance presents another challenge. The language that we use in the financial industry is exclusive and excluding. Financial terms are kept for those in the know (and those in the know have, historically, always been men). Another curveball for female founders is approaching in the form of a government proposal to raise the investment threshold to qualify as a sophisticated investor - it is estimated that this could result in a 70% reduction in female angel investors. As women invest in women, this could ultimately hit investment in female-founded companies. In my top tips below, I touch upon the importance of choosing the right team, and that should include advisors who never make you feel insecure about your knowledge (or lack of it).
Here are my top tips for success:
1. Focus
Founders perform a number of roles, and they rarely have the luxury of unlimited time or resources. You will have an abundance of information being presented to you, and it can be easy to become overwhelmed. The core focus of any entrepreneur must be the establishment and growth of a unique and investible business. The items on your 'to-do list' should always drive towards and further that aim.
2. Simplicity
Entrepreneurs are often creative thinkers with a host of ideas for their nascent business. While this is perfect for problem solving, the market will be less knowledgeable than you. Drill down to your core market. This will prevent you from spreading yourself and your business too thinly and should negate any confusion among potential investors and customers. Simplicity in your presentation of the problem and your solution will help you to deliver a clear pitch and bring in early investors.
3. Choose the right team
It is important that you surround yourself with a team of professional advisers that understand how your business works and that you want to work with – find advisers that ask questions, listen to you and understand your unique business needs.
4. Present a united front
Prospective investors will always be interested not only in the business but also the people behind it. Make sure any co-founders are aligned and each understand their respective responsibilities and contributions to the business. This will include formalising how shares are allocated using a shareholder agreement and potentially putting in place directors’ service agreements.
5. Protect intellectual property
Establishing clear ownership of intellectual property assets will show investors that your business already has value in those assets – and increases the chances of securing investment. Where possible, register patents, trademarks and/or designs. Ensure that proprietary “know how” and other confidential information is appropriately secured and make sure all agreements with third parties are in writing.
6. Choose a distinct brand
Your business name and logo should stand out and be a unique representation of the business and its identity. You will need to grow that reputation and the goodwill associated with the business name and brand. Instruct lawyers or trademark agents to conduct searches to check no one is using your preferred name or brand and then have them register trademarks. You want to avoid any costly re-brand at a later stage.
7. Ensure commercial relationships are covered by contracts
Customer terms and conditions are one of the important documents that you will need to develop at the appropriate time as they will ensure cash flow into your business and help to manage the exposure of your business to risks and liability. Consumer contracts should be drafted carefully to ensure they are fair and reasonable and meet the necessary legal standards. Finally, do not neglect supplier contracts; they secure the timely supply of key services and components for your business.
8. Be adaptable, resilient and persevere
The path to success is rarely straight and can feel steep and challenging. Unforeseen obstacles will inevitably arise and you may need to pivot your proposition at times. Be adaptable to market and societal demands and stay resilient.
All views expressed are those of the author and are presented for information purposes only. The information provided in this article is of a general nature and is not a substitute for specific advice with regard to your own circumstances. You are recommended to obtain specific advice from a qualified professional before you take any action or refrain from any action.
¹ https://www.kauffmanfellows.org/journal/women-vcs-invest-in-up-to-2x-more-female-founders
² https://www.british-business-bank.co.uk/wp-content/uploads/2022/06/small-business-equity-tracker-2022.pdf
³ The 1844 Act established the UK's first registrar of companies, which is known as Companies House today.
