From Gap to Gain: Advancing Gender Equity in Venture Capital Investing

Abstract

The persistent gender funding gap in the United Kingdom's venture capital sector represents a significant economic and ethical challenge, hindering the realization of substantial new value and exposing systemic inequities. Despite growing awareness and evidence suggesting that women-founded businesses perform equally well or better, growth in investments in such enterprises remains slow. While existing research predominantly explores founder- and funder-driven causes of this gap, limited focus has been placed on effective remedies and the role of venture capitalists' perspectives in addressing this issue.This paper aims to address these deficiencies by exploring venture capitalists' views on the gender funding gap, including perceived causes and their capacity to mitigate it. The study investigates motivations and barriers to adopting inclusive practices and identifies what these practices entail. Employing an inductive, exploratory approach, this research conducted ten interviews with representatives from firms publicly expressing commitment to addressing the gender gap and compared responses to founder gender investment data.Findings reveal diverse opinions on the causes of the gender funding gap among venture capitalists, with some emphasizing supply-side factors while others focus on demand-side explanations. The study indicates that recognition of supply-side factors is crucial in motivating firms to adopt gender-inclusive practices. Additionally, this paper identifies diversity, equity, and inclusion performance management as only the first step and highlights the importance of targeted strategies around an inclusive culture, deal flow, and a diverse ecosystem as critical elements in narrowing the gap.The research culminates in the development of the Gender-Inclusive Venture Capital Investment Framework, detailing the interplay between venture capitalists' perspectives and the adoption of gender-inclusive practices. This framework organizes practice categories by implementation level, serving as a practical guide for developing targeted strategies for inclusive investing while sustaining investment performance. The paper contributes to the growing body of literature on gender equity in venture capital and provides actionable insights for practitioners and policymakers aiming to address the gender funding gap.