Closing The Gap

Branson's Virgin Group unveils plan to fund more female-founded start-ups

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Virgin StartUp — the Virgin Group's non-profit that offers funding and business support to British entrepreneurs — has pledged to fund companies started by men and women equally by the end of 2020.

The company said Monday the move made it the first business funder in the U.K. to promise equal backing for men and women. As well as pledging to balance its funding between male and female-founded start-ups, Virgin StartUp said it would partner with consultancy Genderscope to train its business advisors on unconscious gender bias.

In a press release Monday, Virgin StartUp said real change was needed to close the funding gap between male and female entrepreneurs.

A study published in March by Biz2Credit showed that the average business loan for female-owned U.S. firms was a third lower than the average loan given to male-owned enterprises in 2018.

And according to a 2018 report by venture capital (VC) firm Atomico, just 6% of venture-backed start-ups in Europe were led by a female CEO last year. Researchers also found that 93% of venture capital funding in the region went to all-male founding teams.

"We cannot shy away from how difficult it will be to turn this tide," the Atomico report's authors said. "Established VC firms have a responsibility to look harder, and face down their unconscious biases. Dedicated funds targeting investment into these communities are also part of the answer."

Data from financial research firm Pitchbook, meanwhile, shows that companies founded by women secured just 2.3% of all VC dollars invested in the U.S. last year.

Back in Europe, a February study from the government-owned British Business Bank found that for every £1 of VC investment in the U.K., all-female founder teams receive less than one pence, while mixed-gender teams get around 10 pence.

But work is being done to improve the balance. Virgin Startup joins a string of companies around the globe working to improve the amount of funding that goes to female-founded companies.

New York VC Female Founders Fund is on a mission to make more funding available to female entrepreneurs, claiming "women experience greater successes and fewer failures than their male counterparts."

In May, the organization announced it was launching a second fund worth $27 million — five times more than its inaugural fund — that would help early stage female-founded companies.

"The gender gap in funding is not sustainable," Anu Duggal, founding partner of Female Founders Fund, told CNBC via email.

"What investors need to realize is that the decisions they make today in backing entrepreneurs ultimately determines who builds the companies of tomorrow, and the data is clear — more diversity leads to better economic results."

Elsewhere, female-led VC firm SoGal Ventures is investing in early stage companies with diverse founding teams across Asia and the United States. Its investments include language start-up Kitt.ai, which was acquired by Chinese tech giant Baidu in 2017, and Tueo Health, which was bought by Apple in May.

In an email to CNBC, Pocket Sun and Elizabeth Galbut, managing partners at SoGal Ventures, said investing in diverse founding teams was a "no-brainer."

"As women finally start to fully participate in the workplace and become decision makers, it's an unprecedented time for women to redesign and reinvent products and services, industries, infrastructures, and societies," they said.

"We are seeing trillions of dollars of unlocked potential in untapped female talent, however in the past three years, only 2.2% of VC funding went to women CEOs. We're using venture capital as a solution to the biggest bottleneck for women entrepreneurs to innovate in ways we didn't imagine before."

Late last year, Red Capital Partners — a VC fund with operations in Madrid and Tel Aviv — launched a fund dedicated to investing in start-ups co-founded by women. The fund itself is run by a diverse team with "experienced female investment professionals" holding its most senior positions, according to Red Capital's CEO Luz Ramirez.

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