Female-founded startups hardest hit by pandemic

By Robert Scammell

Equity-backed startups founded by women have been hit harder by the Covid-19 pandemic’s economic fallout than startups with all-male founders.

That’s according to a report by The Entrepreneurs Network, a think tank, for its Female Founders Forum project.

The report found four factors that may explain why startups founded by women have been disproportionately affected.

The first is the historic disparity in how equity funding is spread between male-founded startups and female-founded startups. While the share of funding to women-led firms has doubled in the past decade, just 13% of total equity investment ends up at those businesses. In addition, funding tended to be for smaller amounts compared with male-founded companies.

Second, lockdown restrictions have often placed a higher burden on women, who statistically have taken on more childcare responsibilities and other unpaid work.

Retail, hospitality and leisure are among the worst affected sectors by the pandemic. According to data from Beauhurst’s Covid-19 Business Impact Tracker, female-founded companies are more likely to have started a company in these sectors. Women are also less likely than men to start companies in tech, which have tended to experience higher growth during the pandemic.

And finally, the report also found that women are less likely to seek external funding, leaving them with less cash to survive a downturn.

Female-founded startups bounce back

However, the report wasn’t all doom and gloom for female-led startups. The research, which was carried out in partnership with Barclays, suggests that female-founded startups are bouncing back. Some 60% are now operating with “minimal disruption” to their business.

One example is Charisse Smith, CEO of CMe Media, who pivoted her advertising business by arranging new payment plans with clients and applying for funding through Barclays.

The report makes 15 policy recommendations to help level the playing field, including the Department for International Trade publishing statistics on the gender breakdown of SME exporters and making Statutory Shared Parental Pay the same as Statutory Maternity Pay.

Aria Babu, author of the report, titled ‘Resilience and Recovery’, said: “If we want a complete recovery from this recession, we need to see as many entrepreneurs as possible innovate and create new jobs. This means we cannot afford to keep barriers which prevent female entrepreneurs from realising their full talents.”

Juliet Rogan, Barclays head of high growth and entrepreneurs, said: “Whilst great strides have been made for female entrepreneurs in recent years, we know there is still some way to go to level the playing field. As a proud founding signatory of the HM Treasury Investing in Women Code, we hope that our latest commitment to support 100,000 women to start up and run their own business will empower more women to follow their business ambitions and give a boost to entrepreneurship in the UK.

“It’s absolutely critical to the economic recovery that we tap into female-led business potential, and drive forward the UK as one of the best places to be a female entrepreneur.”

Read more: UK tech startups buck coronavirus slump, with funding nearing 2019 levels