Female founders miss out on venture funding for AI, research finds

All-female founding teams received only 0.3 per cent of VC investment in the past decade

Start-ups with female founders account for less than three per cent of all venture capital (VC) funding deals involving AI, according to the Alan Turing Institute's women in data science and AI team.

In a new report, Rebalancing Innovation, Women, AI And Venture Capital in the UK, the Institute points to a lack of diversity in AI investment by UK VC firms.

The research covers the past decade of investment, between 2012 and 2022, and indicates that in that time, 80 per cent of capital raised went to all-male founding teams, while all-female teams received just 0.3 per cent of VC investment.

Not only did female founders see fewer deals, they also received smaller capital offers.

On average, female-founded AI start-ups received £1.3m per deal, compared to an £8.6m deal average for all-male teams - a sixfold difference.

This comes as no surprise, considering that the researchers also found the VC teams making the decision were heavily made up of male members.

Only five per cent of VC firms that participated in funding deals for AI firms have equal or majority representation of female decision makers.

The research underlying the report used descriptive statistics to analyse data from 2012-22 sourced from Pitchbook, a financial data company whose database spans hundreds of thousands of private companies and is broken down by gender.

Long running lack of gender diversity

The findings come on the heels of ONS statistics, released in August, confirming that the number of women working in the UK tech sector dipped between the first and second quarter of 2023, and earlier, in the fourth quarter of 2022.

Earlier this year, another research into the tech workforce found that job losses in the UK tech sector had fallen disproportionately on women.

The overall size of the UK tech workforce continued to grow, despite layoffs in the tech sector beginning in the autumn of 2022.

"The stark figures in our report show the extent of gender inequality in venture capital funding," explained Dr Erin Young, research fellow and project co-lead at The Alan Turing Institute.

"Making sure more female-founded AI companies receive investment is crucial for encouraging responsible AI and fostering innovation. One can only imagine what technical products and services might have been invented if women had equal participation in the VC and entrepreneurial ecosystem.

"We hope that our report offers a crucial starting point for these conversations."

Professor Helen Margetts, director of the public policy programme, also added: "Long-running lack of gender diversity in the technology industry has endured into the AI landscape.

"Tackling this gender gap is a key mission for the Turing's public policy programme, and working towards more equitable participation in the funding landscape will play a crucial role.

"The women in data science and AI team remain at the forefront of identifying and addressing gender inequality in these areas; I am looking forward to the next steps for this vital research."