Women – business investment funds

Although other matters, most notably Brexit, have long since pushed it off the front pages, when it was first published the gender pay gap was extensively covered in the mainstream media and even now it is still referenced on a fairly regular basis.  These statistics, however, only relate to people in employment and hence completely ignore the UK’s substantial population of self-employed entrepreneurs.

The challenges of analysing gender influence in the self-employed world

Information from tax returns is essentially useless for the purpose of studying the impact of gender bias (if any) on the self-employed for the simple reason that the self-employed only have to declare their headline income (and give a basic description of the nature of their business) and they have neither need nor reason (nor, often, time) to provide the sort of details which would be crucial to putting this information into context, such as hourly rate.  Because of this, attempts to study gender differences in the entrepreneurial world have to look at different data, such as the use, or otherwise, of business finance, which is not ideal.

The limitations of using data relating to business finance

The extent, if any, to which businesses need finance depends on a number of variables.  These include the nature of the business, the entrepreneur’s own resources and the speed with which the entrepreneur wishes to grow their business.  These can vary hugely from one situation to another.  For example, a person who wishes to start a “side hustle” creating and selling digital products may be able to do so without any start-up capital whatsoever and if they are happy to grow their business slowly, spending only what they have earned, then they may be able to develop a very solid and sustainable business without ever needing or wanting business finance, which, at the end of the day, is just a very specific form of debt.  By contrast, a person who wishes to open their own restaurant is far more likely to need some form of start-up capital but they may be able to get the money they need without actually using formal financing.  In short, while an analysis of business financing could be both interesting and useful, like the analysis of gender pay in the employed world, its limitations need to be acknowledged and hence its findings should be viewed with some degree of caution.

The reports and their findings

Recently, there have been two main studies focusing on the issues facing female entrepreneurs.  One is the Rose Report (named after its leader Alison Rose) and the other is a study undertaken by The Enterprise Investment Scheme Association and IW Capital.  Both studies raised concerns that female entrepreneurs were being placed at a disadvantage because of bias in organizations which provided funding for start-up businesses.  Taken jointly, the reports discovered that although women make up (slightly over) half the population, they account for only a third of entrepreneurs and that these female entrepreneurs receive less than a tenth of the total funds provided to British-based start-ups.  In fact, female-led businesses receive a lower level of funding than their male-led counterparts at every stage of their business development so it is arguably hardly surprising that a majority of female entrepreneurs cited access to financing as the biggest barrier they faced.  While the studies cited a lack of female representation as one possible reason for this (almost half of venture capital investment teams are comprised entirely of men and only 13% of senior-level positions are filled by women), it is also worth noting that women appear to have less awareness of what options they do have to get funding for their business.