Supporting women in enterprise: Unlocking economic opportunity
1 in 5 of Scotland’s entrepreneurs are women but only 2% of institutional investment goes to women-led companies in Scotland.
Entrepreneurship can be considered Scotland’s economic engine room, driving innovation, job creation, and growth. With 98.2% of businesses employing fewer than 50 people, and another 1.2% employing fewer than 250, smaller enterprises, not just large corporations, play a crucial role in contributing to the health and success of the economy.
To ensure the engine runs smoothly, we fuel it with new founders emerging from our current ecosystem. To sustain and grow it, we must widen the funnel by reaching and supporting a broader, more diverse base of founders across the country.
Today, only one in five businesses are led by women, so finding a way to significantly increase this number represents a huge opportunity for Scotland to boost its economic output. This is backed up by the findings of the Rose Review first published in 2017, which identified that some £250bn could be added to the UK’s economy if gender parity was achieved in entrepreneurship. This would be good for business, for society, and for Scotland.
What progress has been made for women entrepreneurs in Scotland?
The recent Global Entrepreneurship Monitor Report highlighted a significant milestone for Scotland: for the first time, women’s total early-stage entrepreneurial activity (TEA) nearly matched that of men. Additionally, Beauhurst’s 2023 New Start-Up Index reported that Scotland experienced the largest increase in new start-ups outside of London and Northern Ireland, with an 11.8% rise in new companies, including a record number of female-led start-ups across the country.
Recent announcements by the Scottish Government of investment in a new Pathways Fund and a Pre-Start Pilot, a recommendation from the Pathways Report I co-authored with Mark Logan FRSE, indicate further positive momentum.
These milestones should be recognised and welcomed as positive steps forward. However, it is important to temper this with the reality that they are small steps and, if left to work in isolation, will have little impact on the broader and more persistent challenges which exist for women in entrepreneurship.
What barriers still hold women entrepreneurs back?
These wider challenges must be addressed collectively as set out in the Pathways Report. If not, any early gains we see now will inevitably fall at the next hurdle. A prime example is the current skewing of the investment ecosystem, either consciously or unconsciously towards the male demographic, evidenced through statistics which show an average of only 2p in every £1 of institutional investment going to female-led companies.
So, even if the number of female start-ups doubled, progress through to scale-up would continue to be severely impaired. Coordinating interventions and collaborating with other stakeholders and changemakers across the different stages of the entrepreneurial journey such as education, access to finance, investment, and government policy would allow us to implement practical and positive interventions with much greater impact.
The argument that the system functions adequately and that women and other under-represented groups must adapt to succeed only perpetuates the problem. Unfortunately, there is no ‘invisible hand’ in entrepreneurship to automatically correct systemic and gender imbalances. Continuing with the status quo will restrict access to new and exciting economic opportunities.
In parallel, larger corporations should encourage more women into top level executive roles to improve financial performance and outcomes. At the beginning of 2024, only 10% of FTSE 100 companies had a female CEO, but according to McKinsey’s most recent diversity report, organisations with diverse leadership teams are significantly more likely to financially outperform their less diverse peers.
We have a real opportunity to drive the Scottish economy forward by building on the momentum that has been achieved over the past 18 months. By collaborating on wider solutions for greater impact, changing mindsets and investing in female founders and leaders, we will deliver more innovation, more products and more solutions with better financial outcomes, all of which will contribute to greater economic prosperity and sustainability.
Ana Stewart FRSE, Investment Partner, Eos Advisory; Chair, Pathways Forward; new Fellow of the RSE, 2024
This article originally appeared in ReSourcE summer 2024.
The RSE’s blog series offers personal views on a variety of issues. These views are not those of the RSE and are intended to offer different perspectives on a range of current issues.
