Female founders and venture capital – closing the funding gap

Answer

Venture capital (VC) is a form of private equity financing provided to early-stage, high-potential startups by investors in exchange for equity and, often, strategic involvement in the business. It plays a critical role in scaling innovation, but access to VC funding remains uneven, particularly for female entrepreneurs. 

The disparity is stark. Research shows that just two pence of every £1 invested in venture capital funding in the UK goes to female-founded businesses and only 13% of senior individuals on UK venture capital investment teams are women. These figures highlight a persistent gender imbalance in the startup system, despite increasing awareness and policy initiatives aimed at supporting female entrepreneurs.  

Emerging solutions: female-led VC funds 

In response, a new wave of female-led VC funds is emerging to tackle these barriers from the investor side. Initiatives such as the UK government-backed Invest in Women Taskforce, one of the largest funding pools dedicated to female-powered businesses, aim not only to expand access to capital for women-led startups, but also to promote systemic changes that make it easier for women to launch and grow successful businesses. 

Policy momentum: female enterprise investment scheme 

The Women and Equalities Committee has proposed a female enterprise investment scheme to incentivise investment in female-led businesses. This scheme would sit alongside existing tax reliefs such as the Enterprise Investment Scheme but offer higher incentives to drive capital into female-founded ventures. The committee also recommends mandating the Financial Conduct Authority to require VC firms to report the proportion of deals and funding allocated to female-led businesses, with financial penalties for non-compliance.  

Market trends: female founders gaining ground  

Despite the challenges, recent data from Tech Funding News shows that female-founded startups raised more than €100 million in funding across Europe and the UK in a single week in August 2025, and more than €24 million in a single week in September 2025. This momentum continued into October marked by breakthroughs in AI, health technology and sustainable food production. Deeptech is a bright spot, with female founders now outraising their male counterparts in this sector according to the Female Innovation Index 2025.  

Why does this matter for commercial lawyers? 

Commercial lawyers advising startups and investors must understand the dynamics of VC funding, especially how it relates to diversity and inclusion. Female founders can often face unique challenges in accessing capital, including unconscious bias, limited networks and underrepresentation in high-growth sectors like fintech and AI.  

On the fund side, lawyers advising female-led VC firms must navigate the complexities of fund formation, environmental, social and governance (ESG) reporting, and diversity-linked investment mandates. The UK government’s £500 million package to support underrepresented fund managers, including £50 million earmarked for female-led VC funds, marks a significant policy shift and lawyers must be prepared to advise on eligibility, compliance and structuring.  

Commercial awareness in practice  

As the UK startup system matures, commercial lawyers will play a key role in shaping a more inclusive funding landscape. This includes:  

• structuring investment rounds to align with new diversity-focused incentives;
• navigating government grant schemes for early-stage innovators; and
• ensuring compliance with emerging ESG and diversity reporting frameworks.  

Ultimately, commercial awareness means understanding not just the legal mechanics of venture capital, but also the broader social and economic forces driving change. Female founders and fund managers are reshaping the entrepreneurial landscape and lawyers will have a vital role to play in providing legal guidance that supports inclusive investment and sustainable business growth.  

Kirsty Wright is a trainee solicitor at DWF Group Limited.