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3 minute read
24 May 2019
Last year, HM Treasury commissioned an independent review into barriers to female entrepreneurship in the UK to Alison Rose, the Deputy CEO of NatWest Holdings and CEO, Commercial and Private Banking. The Rose Review has now been published and revealed significant unrealised potential for the UK economy: up to £250 billion of new value could be added to the UK economy if women started new businesses at the same rate as men, equivalent to 4 years of economic growth.
Some of the UK’s most innovative and successful businesses have been started and run by women. Recent research reviewed in the Report showed that companies with the greatest gender diversity on their executive teams are 21% more likely to outperform peers on profitability and 27% more likely to create superior value.
The Report found that only one in three entrepreneurs are women, who face certain barriers. Funding was the number one issue, followed by family responsibilities and cultural/societal barriers. In particular, it notes that women tend to be more cautious, with higher risk awareness, be less confident in their capabilities to start a business, and less likely than men to have access to sponsors or a professional support network.
Increasing access to funding should open the door to more female entrepreneurs. The Report reveals that women are 81% less likely than men to feel they can access the necessary start-up funds and female-led businesses secure less funding at every stage of the venture. Increasing awareness of funding that may be available is vital, and there is a range of funding options entrepreneurs should consider. It is important to carefully choose the most suitable option depending on the business and its stage:
Start-up funding can be challenging but by way of crowd funding you can successfully raise finance for your new business venture from a large number of people, typically via internet platforms, with each person contributing a relatively small amount of money. Crowdfunding is the opposite of the traditional approach to business finance, as it provides the opportunity to showcase your idea in front of a pool of potential investors and give them more ways to grow your business in exchange for equity or a first-run product/other reward depending on the size of investment.
An ICO is a type of funding via launching new cryptocurrencies or cryptocoins, which has changed the way in which start-ups raise capital. An ICO is an investment that gives the investor a cryptocoin (i.e a token) in return for investment. The vast majority of ICOs issue tokens are an asset giving investors access to the features of a particular project (e.g. an ICO for a gym or a club may comprise free membership to the ‘investor’ for a period in place of a repayment of the loan or the payment of interest) rather than ownership of the company itself.
It is ironic that women, who the Report found are more cautious and less likely to take on debt than men, should find this trait to be an inhibiting factor to obtaining capital. Lenders and banks price debt financing partly according to their perceived exposure to risk, so there is a coefficient that could be exploited if there were more awareness amongst lenders and banks of this trait. If there is lower risk, the price of borrowing should be reduced and the business takes on less debt.
From our experience, we firmly believe that supporting female entrepreneurs will benefit the UK economy and society as a whole. In general, women tend to bring a wider perspective to managing a business, and are likely to multi task and adopt a holistic approach. Thinking outside the box can be vital to a business’ success in the current environment, whilst adopting a balanced and healthy approach is especially important for successive family businesses.
We know that many female entrepreneurs cite a struggle to be taken seriously, and feel the need to work much harder than their male counterparts to build their reputation in business. Therefore, we hope that the Rose Report’s findings and recommendations will help support entrepreneurial women and close the gender gap.
24 May 2019
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