Bridging the Finance Gap for Women Entrepreneurs

7. Financing growth-oriented start-ups

Abstract

Addressing longstanding challenges in access to finance for women entrepreneurs, as well as creating a pipeline of women founders and investors. This chapter discusses policy approaches to improving access to financing for growth-oriented start-ups led by women, including by encouraging more women to innovate and a start business with high-growth potential and addressing gender bias in financial markets.

 

Investing in innovative and growth-oriented women entrepreneurs

Start-ups with the potential to grow into impactful businesses attract a lot of attention from policy makers because scale-ups are responsible for substantial job creation, stimulate innovation and raise competitiveness. International evidence shows that scalers – those firms that have at least 10 employees that grow in employment or turnover at more than 10% annually for three or more consecutive years – are the engine of job and value creation. While they represent only 13-15% of SMEs, they contributed more than half of all new jobs generated by SMEs between 2015 and 2017 (OECD, 2021[1]).

Women entrepreneurs are under-represented among entrepreneurs operating high-growth potential firms and start-ups. Only 15% of start-ups seeking risk capital investment have at least one woman among the founding team and less than 6% are solely founded by a woman (Lassébie et al., 2019[2]). The small number of women involved in growth-oriented entrepreneurship is due to a variety of factors, including differences in motivations and ambitions in entrepreneurship. Across OECD countries, women are about 41% less likely than men to have high-growth expectations (i.e. expectation of creating more than 19 jobs over the next five years) (OECD/European Commission, 2023[3]). This is shaped by gender norms, education and labour market experiences, family and care responsibilities, attitudes towards risk and more (OECD/European Union, 2019[4]). Lower aspirations for becoming a scaler among women, on average, will reduce their demand for growth-oriented financing.

In addition, women entrepreneurs are less likely than men to be involved in innovation and research, which can propel start-ups to high levels of growth. Women-led businesses are less likely to carry out technology-based innovations; however, the share of women entrepreneurs in knowledge-intensive professions and innovative sectors has increased (Kan et al., 2018[5]). Moreover, women only accounted for 20% of global inventors (relative to 11% in OECD countries) in 2019, which is also due to an under-representation in STEM fields in higher education (OECD, 2022[6]). These gender disparities can lead to women being disadvantaged in pursuing innovative entrepreneurship, lower levels of skills, limited opportunities to build relevant networks in the innovative sectors in the long-term and barriers to access to growth-oriented financing.

Finally, it must be recognised that there are market barriers that disproportionately hinder women entrepreneurs from successfully acquiring growth financing. Barriers are often related to information asymmetries that place women entrepreneurs at a greater disadvantage than men entrepreneurs because investors often make investment decisions based on their “gut feeling”, which can be biased by a range of unconscious discriminations including taste-based discrimination (i.e. behaviour and decisions are not tied to facts), stereotypes (i.e. decisions are based on incorrect beliefs and perceived traits that are associated with particular groups) and investor homophily (i.e. decisions based on association, similarities and familiarities) (Ewens and Townsend, 2020[7]). In addition, there is some research suggesting that there are differences in how investors interact with men and women entrepreneurs. Investors typically ask men and women entrepreneurs different questions at pre-funding stages and investors often respond to intangible characteristics (Ewens and Townsend, 2020[7]). For example, some research suggests that men and women entrepreneurs signal their legitimacy in different ways (Schillo and Ebrahimi, 2021[8]).

These differences in demand for growth financing and market inefficiencies result in a large gender gap in market outcomes. Women entrepreneurs are less likely to successfully receive equity investments compared to men. For example, women entrepreneurs are about 63% less likely to secure venture capital (VC) funding compared to men (Guzman and Kacperczyk, 2019[9]), although there is some variation in the size of this gender gap across countries (Färber and Klein, 2021[10]). Moreover, women-owned businesses receive less funding on average. Women entrepreneurs receiving VC investment only receive about 70% of the funding that men receive on average (Lassébie et al., 2019[2]), and those in United States and United Kingdom with VC backing have been less likely than VC backed men-led start-ups to successfully secure subsequent rounds of funding (Hathway, 2019[11]; Shuttleworth et al., 2019[12]). There has been an increase in VC funding for women entrepreneurs, but mostly through mixed teams of co-founders. Mixed men-women teams received 23% of VC funding in 2023 compared to about 11% on average in the period 2015-22. More generally, estimates suggest that it will take more than three decades to close the gender gap in the VC market if current trends continue (Ewens, 2022[13]).

The lack of access to risk capital also has wider consequences for women’s entrepreneurship. One is that women entrepreneurs are missing out on informal learning opportunities. VC investors typically provide professional management support to the businesses they are investing in, which is an opportunity for the founders to strengthen their management and leadership skills and networks. In addition, the lack of women entrepreneurs receiving equity investment restrains the development of an entrepreneurship pipeline because women entrepreneurs have fewer opportunities to transition from successful entrepreneur to mentor and investor that reinvests in other women.

The role of public policy

Governments are well-aware of the gender gaps in growth-oriented entrepreneurship and recognise that economies are missing out on growth, innovations and jobs. Therefore, a wide range of policies and measures are used to address issues on both the supply and demand sides of the financing market as well as improving the functioning of the market.

While governments should avoid using a “deficit” model when designing policy, there is scope to boost motivations for entrepreneurship and ambitions for growth among potential women entrepreneurs. Current approaches tend to focus on entrepreneurship education and the use of role models and entrepreneurship ambassadors to reach out to young women to inform them about entrepreneurship. There is also a need to increase the levels of entrepreneurship and leadership skills among women so that their businesses can have more effective interactions with potential investors. This calls for investment-readiness programmes that also help women entrepreneurs grow their networks to open more funding opportunities.

On the supply side of the market, public policy has a role to educate investors about the benefits of investing in women-led businesses and on how unconscious biases can be reduced during investment decisions. Some progress could be achieved by increasing the number of women involved in managing VC funds and making investment decisions. Only 5% of VC funds in the United States are managed by women (Ewens, 2022[13]). Several OECD governments run training programmes for potential investors, and it is becoming increasingly common to engage successful women entrepreneurs in programmes and encourage them to “give back”, including by becoming angel investors. This will help increase the supply of finance available and would be expected to direct more funds toward women-led businesses. However, this is not going to be an automatic solution for reducing the funding gap because women investors, on average, make fewer and smaller investments than men investors, and evidence from the United States shows that their portfolios tend to under-perform by about 10-15%, which is likely due to less experience (Ewens, 2022[13]). This calls for greater efforts to train more women investors, showcase women investor role models and strengthen investor networks.

Moreover, governments are becoming increasingly engaged in directly supporting funds that invest in high-potential women entrepreneurs (OECD, 2023[14]). Direct approaches include the management of funds by public authorities, including for example the Female Founders Initiative in Australia, Women in Technology Venture Fund in Canada and Competitive Start-Fund for Female Entrepreneurs in Ireland. The use of such funds appears to be growing, and the majority of funds are receiving increasing amounts of capital (OECD, 2023[15]; OECD, 2025[16]) (OECD, 2023[14]).

Innovations in the financial sector also hold potential for increasing the supply of growth funding available as new actors enter the market and new products become available. This would be expected to benefit all entrepreneurs, including women, but the limited evidence to date paints a mixed picture on whether these innovations will reduce the gender funding gap. For example, the democratisation of financial markets through crowdfunding creates new potential sources of funding and research often shows that women are successful in securing debt and equity through crowdfunding platforms. However, other new tools such as non-dilutive venture debt for VC-backed companies risks reinforcing the gender gap in VC markets since those receiving VC – mostly men entrepreneurs – will have access to greater support.

Governments also have an important role to work with the private sector to reduce information asymmetries. New private sector platforms are emerging that collect and provide data on start-ups, entrepreneurs, investors and deals. These help to increase the amount of information available in the market and there appears to be a standardisation in the information available, which improves comparability. Both entrepreneurs and investors stand to benefit. However, the gender implications are not clear because these platforms currently tend to focus on certain sectors where women are under-represented (Ewens and Townsend, 2020[7]). This suggests that most women entrepreneurs are not yet benefiting from these developments. Similarly, there are government-led collaborations with financial institutions to collect more gender-disaggregated data so that financial markets can be better-understood with the aim of reducing unconscious bias in lending and investing decisions. To maximise the benefits of improved information in the market, there is a need to also educate those making investment decisions about the different types of gender bias that currently influence investments.

Finally, governments could reinforce policy actions to strengthen access to finance for women entrepreneurs by also making entrepreneurship ecosystems more accessible for women entrepreneurs. While finance is a needed to scale a company, it alone is rarely sufficient. Women entrepreneurs also need improved access to networks and professional support organisations.

Lessons from the policy cases

Eight country-level policy insight notes focus on policies and programmes designed to improve access to finance for innovative and high-growth oriented women entrepreneurs. They discuss various policy instruments that address gender bias in lending and investment practices (Australia, New Zealand, United States) and ensure that women play a greater role in innovation (Brazil, Finland, France, Italy). The notes also explore the impact of broader gender issues related to entrepreneurship and labour market participation by women on opportunities for women-led businesses with aspirations to reach new markets (Nigeria). These notes highlight several key takeaway messages for policy makers:

1. Increase efforts to build a pipeline of women entrepreneurs, including through education, role models and promotion campaigns. This could include efforts to encourage more young women to study in STEM fields so that more women can become involved in scientific innovation and start-ups.

2. Address the under-representation of women on the supply side of the market with training and support for the creation of women-dedicated investor networks. This could be paired with education for investors more generally to increase awareness about potential biases in investment decisions and the benefits of investing in women-led businesses.

3. Consider using dedicated public funds to fill current market gaps as several countries have had success. Many of these funds have succeeded because the financial mechanisms are strongly linked with leadership and management training, business counselling and advice, and networking that combine to offer a more holistic support package. Governments are encouraged to continually monitor and regularly evaluate such programmes, including their impacts on the private markets.

4. Enhance gender-disaggregated data collection as well as monitoring and evaluation mechanisms to measure women’s entrepreneurship and the impacts of policy on their ability to access growth financing.

References

[13] Ewens, M. (2022), “Gender and Race in Entrepreneurial Finance”, No. 30444, National Bureau of Economic Research, https://www.nber.org/papers/w30444 (accessed on 17 December 2024).

[7] Ewens, M. and R. Townsend (2020), “Are early stage investors biased against women?”, Journal of Financial Economics, Vol. 135/3, pp. 653-677, https://doi.org/10.1016/j.jfineco.2019.07.002.

[10] Färber, M. and A. Klein (2021), “Are Investors Biased Against Women? Analyzing How Gender Affects Startup Funding in Europe”.

[9] Guzman, J. and A. Kacperczyk (2019), “Gender gap in entrepreneurship”, Research Policy, Vol. 48/7, pp. 1666-1680.

[11] Hathway, I. (2019), The Ascent of Women-Founded Venture-Backed Startups in the United States, Center for American Entrepreneurship, Washington, DC, https://www.startupsusa.org/women-founded-venture-backed-startups/ (accessed on 17 December 2024).

[5] Kan, A. et al. (2018), “Evaluation of Young Farmers Project Support Program in Terms of Agri-Entrepreneurship in Turkey”, Pakistan Journal of Agricultural Sciences, Vol. 55/4.

[2] Lassébie, J. et al. (2019), Levelling the playing field: Dissecting the gender gap in the funding of start-ups, OECD Publishing, Paris.

[16] OECD (2025), “Benchmarking government support for venture capital: A comparative analysis”, OECD SME and Entrepreneurship Papers, No. 71, OECD Publishing, Paris, https://doi.org/10.1787/81e53985-en.

[14] OECD (2023), Joining Forces for Gender Equality: What is Holding us Back?, OECD Publishing, Paris, https://doi.org/10.1787/67d48024-en.

[15] OECD (2023), Joining Forces for Gender Equality: What is Holding us Back?, OECD Publishing, Paris, https://doi.org/10.1787/67d48024-en.

[6] OECD (2022), Education at a Glance 2022: OECD Indicators, OECD Publishing, Paris, https://doi.org/10.1787/3197152b-en.

[1] OECD (2021), Understanding Firm Growth: Helping SMEs Scale Up, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/fc60b04c-en.

[3] OECD/European Commission (2023), The Missing Entrepreneurs 2023: Policies for Inclusive Entrepreneurship and Self-Employment, OECD Publishing, Paris, https://doi.org/10.1787/230efc78-en.

[4] OECD/European Union (2019), The Missing Entrepreneurs 2019: Policies for Inclusive Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/3ed84801-en.

[8] Schillo, R. and H. Ebrahimi (2021), “Gender dimensions of digitalisation: a comparison of Venture Capital backed start-ups across fields”, Technology Analysis & Strategic Management, Vol. 34/7, pp. 733-745, https://doi.org/10.1080/09537325.2021.1918336.

[12] Shuttleworth, N. et al. (2019), UK VC and Female Founders, British Business Bank report in collaboration with Diversity VC and BVCA, https://www.british-business-bank.co.uk/sites/g/files/sovrnj166/files/2022-11/UK_VC_and_Female_Founders_Report_British_Business_Bank.pdf (accessed on 17 December 2024).