Female-founded companies account for under 3% of venture capital (VC) funding deals involving AI startups, new research as found.

A new report from the Alan Turing Institute‘s Women in Data Science and AI team paints a concerning picture of gender diversity with regards to AI-focused VC investment in the UK.

Between 2012 and 2022, 80% of total capital invested by VCs in AI was raised by all-male teams. In contrast, all-female teams raised a mere 0.3%.

When female-founded AI startups secured funding, they received on average six times less capital per deal than startups founded by male entrepreneurs. On average, all female teams raised £1.3m per deal compared to £8.6m raised by all-male teams.

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 decision maker level.

Venture capital firms play a pivotal role in technological innovation, and determine the companies that do and do not get funded. With the explosion of generative AI, there is an urgent need to ensure that women have an equal place in the VC ecosystem and tech entrepreneurship more widely.

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 that much smaller.

Investment in AI software is booming globally, however, but all-female teams raised less than half a percent (0.4%).

Recommendations

The Alan Turing Institute provided a number of recommendations for the government and industry bodies to take to improve gender diversity across the VC and tech ecosystems.

Improving recruitment and promotion processes to drive female-engagement and enable more women to achieve higher roles in VC and in tech is vital. VC firms also need to take steps to ensure women are included in the decision process.

VC firms need to not only work on increasing diversity, but must foster a more inclusive culture. The same can be said for technology, with women citing culture as a reason to leave the industry altogether.

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VCs need to keep track of the types of AI companies they are investing in, and ensure that these companies improve equality outcomes. This means investing in more diverse companies with more inclusive work policies and frameworks, and better hiring practices to mitigate gender bias.

The institute is also challenging VC to diversify their own ecosystem by building relationships with business and tech communities which are already more diverse and inclusive. This can be mutually beneficial and widen access to both investor and founder talent.

However, all of these appear easier said than done. As the landmark Pathways report put it earlier in the year: “Our society has a degree of sexism embedded within it, and these prejudices are transferred from generation to generation,”