AI startups founded by all-female teams have suffered a huge disparity in venture capital (VC) funding compared to all-male startups, even as investment in the sector has risen, according to a new report.
Between 2012 and 2022, VC capital raised per deal by female-founded AI firms was £1.3 million, six times less than the £8.6 million per deal raised by all-male teams.
Male-founded AI startups also received the majority (79.6%) of deals, worth £55.1 billion. By comparison, female-founded startups accounted for just 2.1% of VC deals for AI, worth £200 million.
The results were shared in a report carried out by the Alan Turing Institute, Rebalancing Innovation: Women, AI and Venture Capital in the UK.
AI funding gravitates to all-male startups
Investment in AI startups was almost entirely made by men, the report found, with 95.5% of deals across the period made by VCs with a majority of male decision-makers at the top.
Just 2.7% of deals were made by majority female decision-makers, and even less (1.8%) by VCs with an equal gender balance.
“The stark figures in our report show the extent of gender inequality in venture capital funding,” said 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.”
One-fifth of UK VC investment roles are held by women, the study revealed. However, with far fewer women in senior investment roles, the sector is dominated by all-male decision-makers. The authors drew a line between this and equivalent investment gaps borne out across all sectors.
Outside of AI, female-founded startups still receive funding that is hugely disproportionate to those founded by men. Across the same period, the capital raised by female-founded companies (£2.5 million) was four times lower than all-male-founded companies (£11 million).
Companies with mixed founders received a similar proportion of deals regardless of sector, at 18.5% of all deals and 18.3% of AI sector deals.
The authors noted that a rise in the number of female startups did not result in a proportional rise in funding received.
Per Tech Nation, the number of female-founded companies created in 2022 was double the number in 2018, but in that time investment in female-founded companies rose from 9.5% to 11%.
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Generative AI has seen record growth and investment even as global VC funding has declined, with the likes of OpenAI and Databricks snagging billions in funding rounds, but female-founded startups have not seen the benefits of this.
The authors suggested VC decision-makers should keep better records of their investment decisions and be more transparent about the mitigations they have against gender bias.
They also urged the government and related industry bodies to expand programs intended to promote, retain, and upskill women in the sector.
In March 2023, a government-commissioned piece of analysis carried out by Dealroom revealed that while female-founded startups raised £3.6 billion in VC funding in 2022, they only made up 15% of the total funding provided to startups throughout the year.
