After spending seven years in asset management with Goldman Sachs, Farah Kabir believed she understood how to thrive in a predominantly male industry.

However, her transition from banking to establishing a sexual wellness startup called Hanx revealed a different reality when it came to securing funding in venture capital environments.

“Fundraising poses significant challenges for women due to pervasive sexism,” she stated. “Our initial hurdle was gaining respect; investors often referred to my co-founder and me as ‘two young girls’ and dismissed our pitch as a joke, despite my banking background and her medical expertise in gynecology.

“During a pitch to an angel syndicate, an investor in his fifties asked me to demonstrate how to put on a condom. Such requests are seldom made of male entrepreneurs. We had to maintain our composure and brush it off, as funding in the UK typically comes from men.”

Anecdotes like Kabir’s are common among female entrepreneurs, who are often aware of the stark funding disparities. Recent data from the research firm Beauhurst revealed that, of the £8 billion in UK equity investment during the first half of 2024, female-led teams received just £145 million, constituting only 1.8% of the total investment. In contrast, all-male teams captured a staggering £6.92 billion, or over 86%.

Why is it so difficult for women to secure funding? It is not a reflection of their capabilities; statistics indicate that women often excel in business management. A study by the Kauffman Foundation showed that female-led tech teams yielded a 35% higher ROI compared to their male counterparts.

Analysis by First Round Capital over a decade revealed that the female-founded companies in its portfolio outperformed all-male firms by 63%.

This funding disparity largely stems from male investors favoring male entrepreneurs. According to Kauffman research, male investors are half as likely to fund a woman as opposed to female investors. Furthermore, female investors make up only about 5% of the angel and VC investment landscape in Europe.

Marta Zaccagnini, European manager for Village Capital, notes the concept of “investor homophily,” which refers to the inclination to fund individuals who resemble oneself.

“Investors find it challenging to distribute funds to women-led companies due to the lack of diversity in their own ranks,” she explains.

Research indicates that when a female entrepreneur enters a VC pitch meeting, her discussion is likely to center around risks. In contrast, male entrepreneurs are typically questioned about their growth potential. Janthana Kaenprakhamroy, founder of Tapoly, an insurance firm valued at £10 million, shared her experience, stating, “While pitching, I faced numerous ‘what if?’ scenarios and worst-case questions, whereas male founders were asked about their future vision and growth prospects. This approach can create a more favorable funding environment for them.”

Male investors who address these biases confirm their existence. Andrew Leek, founder of the private equity firm Ignite Growth, revealed that some men in the industry adhere to the stereotype that a successful founder must possess certain masculine traits. He recounted hearing comments like, “It’s a fantastic business, she’s impressive, but I won’t invest because she’s just married—what if she has a baby?”

Similarly, a male angel investor involved with a female-led firm worth £60 million noted, “I’ve witnessed investors wait until a female founder leaves the room to say, ‘Oh, she would have struggled without your support.'”

Lemon Fuller, founder of the underwear brand Lemonade Dolls, highlighted her own struggles, having raised nearly £4 million through “six uncomfortable rounds”. In her initial fundraising experience, investors replaced her as CEO with a male counterpart, arguing she lacked the necessary experience. “I effectively continued to run the business while being publically overlooked,” she recalled.

Fuller further expressed that female entrepreneurs are often belittled. During a presentation regarding the investment gap, a senior director at a prominent investment firm advised her to “be less emotional and stick to the facts,” despite her presenting concrete data. “The room fell silent after his remark,” she noted.

Joanna Jensen, who sold her toiletries company Child’s Farm for nearly £40 million in 2022, explained that the pitching styles of male and female founders might differ, sometimes putting women at a disadvantage. “Women tend to be more transparent about numbers and expectations, while men often sidestep these issues,” she observed.

Overreliance on statistics can skew investment choices. Research from Buzzacott revealed that the average sale price for companies founded by men was 18% higher than that for female-founded firms between 2013 and 2023, a discrepancy partially attributed to the fact that female entrepreneurs often exit earlier.

Kaenprakhamroy explained, “For many women, selling early seems the safest route, given the substantial pressure to achieve prompt success after overcoming fundraising challenges. Balancing business responsibilities with family obligations can be intense, making early exits appear to be a practical solution.”

Stereotypes further hinder female entrepreneurs. A Harvard Business Review report on 2,000 venture-backed startups indicates that female-led firms that initially secured funding from female VCs often faced challenges when seeking funding from male investors in later rounds. The study found that if a female founder first receives funding from male investors, she is viewed as competent. Conversely, those who start with only female investors may be perceived as reliant on gender over capability.

The current funding gap is partly influenced by the sectors where many female founders operate, as a significant portion of capital flows into AI ventures, a field where only 7% of founders are women.

Michelle He, co-founder of AI fintech Abound, falls within that 7%. Her company has secured £1.3 billion in funding. She recounted experiences where investors openly dismissed her due to her prior consulting background, stating, “They boldly proclaimed that they do not invest in founders from consultancy backgrounds because they believe such individuals are skilled in concepts but incapable of building a business from scratch. This bias proved to be a greater obstacle than gender bias alone.”

He mentioned that she overcame the grim scenarios painted by gender-related statistics by focusing on performance over biases: “Investors prioritize returns; if your business generates satisfactory returns, gender considerations fade to the background.”

Notably, her male co-founder may have influenced investors’ perceptions positively.

At Astia, a $100 million investment firm dedicated to supporting businesses with at least one female leader, efforts are underway to mitigate biases. They facilitate blind pitch submissions through their website, followed by review and evaluation by their advisors and proprietary software. The subsequent stage involves a “cameras-off” online presentation to their executives, aimed at reducing biases related to appearance.

Managing partner Evie Mulberry noted that Astia’s data supports the efficacy of this bias-removal approach, revealing that companies that have undergone this process over the past five years boasted a failure rate of just 1.5%, significantly lower than the 90% failure rate typical for startups.

“We aim to eliminate instinct-driven decisions. The issue lies in the barriers within investment systems and networks, not with women themselves. Our goal is to transform the investment ecosystem,” she concluded.

Have you faced discrimination from men in finance? Share your experiences in the comments below.