Susan Nightingale

Equality, diversity and inclusion is key to a successful business ecosystem. Yet, while one in five entrepreneurs in Scotland is female, there is a huge gap in the amount of funding awarded to female-led businesses. Only a very small proportion of investment capital goes to start-ups and scale-ups founded by women.

Figures from the British Business Bank’s Small Business Equity Tracker last year showed that for every £1 of equity investment in the UK during 2021, female founders received just 2p. Meanwhile, male founders received 84p and mixed-gender teams got 14p.

Last year, the Scottish Government published the Pathways report – an independent review into women in entrepreneurship – which looked at some of the barriers to female entrepreneurship. Among them, the fact that women typically receive far less investment than men at all stages of the entrepreneurial journey was highlighted as one of the top five reasons why women are less likely to start their own businesses.

Of the Scottish companies that received external investment in 2022, only 12% were female-led, compared to 73% led by men. For everyone working in small business finance, our aim must be to get that to a 50:50 ratio where female founders have access to the same opportunities as their male counterparts.

There are some great initiatives already underway across Scotland to help close the gap, with a number of groups focused on encouraging female angel investment. Angel investors are private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own finance.

Women angels play a critical role in supporting female entrepreneurship and early-stage businesses. Research shows that women are 50% more likely to back female-led companies, so one of the potential solutions lies in increasing the number of women investing in smaller businesses.

However, we know there is a gap in the knowledge of this kind of investment among potential investors and founders with many women never having considered becoming an investor. We recently joined forces with Mint Ventures – Scotland’s female-led angel investment syndicate – to help raise awareness of the opportunities.

The syndicate is on a mission to support early-stage female-led firms to unlock the capital they need to grow, while also debunking the myth that women need to be wealthy to angel invest. The momentum is growing, with the group seeing increased numbers and having made its first investment into Dundee-based Heero Technologies in April. The female-founded cleantech start-up secured funding for the development of its app that guides homeowners through the process of energy-saving retrofit.

While the figures demonstrate that there is still some way to go, it is hugely encouraging to see finance markets evolving in the right direction. Providing access to relevant, targeted information is key to growing Scotland’s female angel community and, by helping even more investors to get involved, we can ultimately help female-founded businesses and entrepreneurs with the finance they need to thrive.

Susan Nightingale is UK Network Director, Scotland at the British Business Bank