Female-led Startups are Being Left out of the AI Boom

As investors scramble to back promising AI startups, female-led companies are being left in the dust. 

That’s according to a new report from the Alan Turing Institute, which revealed that AI startups founded by women made up just 2% of AI venture capital investment deals over the past ten years. 

It also found that the Female founders who did receive funding secured significantly smaller average investments compared to their male counterparts. 

Female-founded AI startups received an average investment of just £1.3 million compared to the £8.6 million average investment for AI startups founded by men, the report noted. 

“The recent explosion in interest and investment in AI, especially generative AI, means that there is an urgent need for women and minorities to have equal access in the tech and venture space,” said Alan Turing Institute research fellow Dr Erin Young.

“Venture capital firms impact the business models of the startups in which they invest, and VCs tend to invest in companies that reflect their own networks and value systems, in turn shaping the technologies developed. Encouraging inclusion in the VC space can help promote responsible AI design, tackle AI biases and foster innovation.”

A male-dominated sector

The researchers also highlighted that most of the teams who make these funding decisions are men – only 5% of VC firms that participated in funding deals have an equal or majority representation of women at the decision-maker level.

The problem appears to spread across the entire tech industry. Figures released by the Office for National Statistics (ONS) in August revealed that the first half of 2023 saw a drop off in the number of women working in the UK tech industry of around 3,000.

Shocking stats from @turinginst that female-founded #AI startups won just 2% of funding deals. Not surprising when you consider recent research from @IvonaHideg @OxfordSBS exploring the role #benevolentsexism plays in entrepreneurship funding decisions. https://t.co/DBoka1qf8L https://t.co/hwtm1wrmCb

— Oxford Answers (@Oxford_Answers) October 4, 2023

Recent data from the British Business Bank also found that there had been no improvement in the share of equity investment deals raised by all-female-founded startups in the UK over the last decade.

Last year, women-founded tech companies only raised 15% of total VC funding going to tech in the UK, making the percentage of AI startups appear even smaller. 

The AI boom 

A recent report by Goldman Sachs forecasted that AI investment will approach $200bn (£166bn) globally by 2025, while a Bloomberg report published earlier this year found that generative AI could become a $1.3tn market by 2032. 

As investment soars, experts warn that there is an urgent need to ensure that women have an equal place in the VC ecosystem and tech entrepreneurship more widely.

The Alan Turing Institute’s report suggests improving recruitment, monitoring investment practices, and ensuring women are being allowed similar opportunities to encourage investment into female-founded AI startups. It also encouraged investors to consider their investment practices to tackle gender bias.

A lack of diversity in the AI industry has led to problems in AI systems in the past. For example, facial recognition systems have struggled to accurately identify people with darker skin, in some cases leading to false positives when used for law enforcement.

The world is buzzing with excitement about the transformative power of generative AI. Companies across industries are beginning to understand the endless possibilities and applications of this ground-breaking technology and becoming aware of its competitive advantage. 

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