Female entrepreneurs struggle with obtaining funding despite an increasing number of business starts, due to biases within credit scoring and venture capital industries.

In the dynamic world of entrepreneurship, the UK has seen a significant shift in the number of women-led businesses over the past few years. According to recent statistics, women now account for nearly half (46%) of entrepreneurs in the UK, a marked increase from around one in three in 2019.

However, a persistent funding gap remains a challenge for these female entrepreneurs. Innovations from women-led firms often do not fit existing funding taxonomies, making it difficult for them to secure debt financing. This issue is compounded by the fact that early-stage and underrepresented founders, many of them women, are penalised for lacking trading history or assets.

Despite these challenges, angel investors have been more receptive to funding women-led start-ups compared to traditional financial institutions. In 2024, applications for funding from female founders grew sharply, rising 90% year-on-year. Notable investments include those made by angel investors and funds with diversity initiatives, who have been more open to the visions of women founders like Samantha-Jane Agbontaen and George Fairhall.

However, it's disheartening to note that in 2024, women-led start-ups secured only 2% of annual venture capital funding. This figure has not improved since 2022, despite the increase in the number of female-led businesses.

Current credit scoring models are often biased towards more mature businesses, creating a 'thin-file' or 'no-file' problem for innovative but unproven businesses. High match-funding requirements for debt products linked to new business grants, accelerators, or public funds can be prohibitive for female founders.

Moreover, biases in 'pattern-matching' processes, stereotypical expectations, and limited access to investor networks and mentorship for diverse founders affect all funding routes, especially traditional financial institutions. George Fairhall, the founder and CEO of wac, aptly highlights this issue, stating that as a sole female, non-technical founder of a B2C product, with no revenue, targeting a low-paid market seen as 'high risk,' she didn't fit any investor boxes.

Female-led start-ups often carry less debt compared to their male-led counterparts, but face structural barriers in accessing equity. The lack of specific data on which investment platforms had disproportionately low participation in venture capital funding for companies founded by women in the first half of 2025 is a concern.

Advances in AI and alternative data can carry risks of embedding new forms of bias in the funding system. As we strive to bridge the funding gap for women, it's crucial to ensure that these advancements do not exacerbate existing inequalities.

Without intentional reform of both equity and debt systems, female founders risk being locked out of the tools that should fuel their growth. There is more awareness and visibility around the funding gap for women, but without concerted efforts to address these systemic issues, the progress made so far may not translate into sustainable growth for women-led businesses.

Female entrepreneurs struggle with obtaining funding despite an increasing number of business starts, due to biases within credit scoring and venture capital industries.