A report published by the UK’s Royal Academy of Engineering has found that fewer than one in ten deep tech companies in the country are founded by all-female teams, highlighting a stark gender disparity that could hamper the growth of the sector if not addressed.
The State of UK Deep Tech report found that 77.1% of founding teams are all men, compared to 15% who are mixed and 7.5% who are founded solely by women. The report attributed the disparity in part to the low proportion of women studying STEM subjects in the UK, while highlighting wider challenges in the investment landscape that are affecting female entrepreneurs and potential founders.
Jump to:
The challenge of the UK’s deep technological diversity
According to the report, the UK is home to almost 3,500 active deep tech companies, 87.2% (3,018) of which are based in England and the majority are concentrated in London and the south-east of England. These companies attracted a total of £5.22 billion ($6.6 billion) in 2022, with areas such as artificial intelligence, cleantech, quantum computing, and virtual reality and augmented reality receiving increased attention from both founders as well as investors.
DOWNLOAD: TechRepublic Premium Quick Cleantech Glossary
However, the lack of diversity in deep tech founding teams (Figure A) poses potential challenges for the sector, particularly in terms of innovation potential and access to diverse markets and prospects.
Figure A
While representation among executive and senior management teams is more diverse (39.6% of UK deep tech companies have mixed teams), 56.7% are all men. This means that only 3.5% of all deep tech companies are led by all-female teams (Figure B).
Figure B
A familiar problem of technological diversity
The Royal Academy of Engineering report echoes findings published by the Alan Turing Institute in October 2023, which found that AI startups founded by all-female teams accounted for just 2.1% of funding deals between 2012 and 2022. These all-female teams have only raised just 0.3% of the £69.5bn ($87.9bn) of venture capital funding raised by AI startups during that period.
While the RAEng report noted that gender diversity was “improving among deep tech companies as they grow and expand beyond their initial founding teams,” it also highlighted the historically low participation of women and girls studying STEM subjects. in the UK as a reason behind the lack. of female representation.
This has seen an uptick in recent years and may improve the diversity of deep tech founders in the coming years, according to the report. However, it also suggests that this gap could be partly due to investor biases, underscoring the need for stronger support systems for female entrepreneurs.
Ana Avaliani, director of the Enterprise Hub at the Royal Academy of Engineering, said in a press release: “While there is much to celebrate, the UK State of Deep Tech underlines the important work that still needs to be done to help deep tech founders to scale and grow.” their companies in the United Kingdom. It is also vital to a more successful and inclusive ecosystem that the gender imbalance in deep tech leadership is addressed and that leadership diversity in deep tech companies is championed.”
The benefits of promoting diversity
Numerous reports over the years have highlighted the benefits of improving diversity, equity and inclusion within organizations in terms of boosting workplace culture and job satisfaction, as well as the company’s own performance. .
According to McKinsey’s 2023 report, Diversity Matters Even More: In favor of holistic impact, companies in the top quartile of gender diversity on executive teams are 39% more likely to outperform their peers financially, compared with 15% in 2015. Similarly, companies in the top quartile for board gender diversity are 27% more likely to have superior financial performance than those in the bottom quartile.
How to increase female participation in deep tech
The RAEng report highlighted the need for specific initiatives and policy changes to encourage greater female participation and leadership in deep tech, which could lead to more diverse perspectives and innovation in the sector.
To address this, the report suggested increasing support for women entrepreneurs, potentially through targeted funding, mentoring programs and networking opportunities. Additionally, promoting STEM education among girls and women can help increase the pool of potential female founders in the future.
DOWNLOAD: TechRepublic Premium Diversity and Inclusion Policy
Commenting on the report, Michelle Donelan, UK science and technology secretary, said she was “committed to driving the uptake of STEM among people from all backgrounds, to ensure everyone can achieve their potential as we build a highly skilled workforce.” qualified in the industries of the future. .”
Donelan added: “We are a global leader in artificial intelligence, quantum computing and other emerging forms of deep technology. “To maintain this position, we are working closely with partners such as the Royal Academy of Engineering to harness talent across our country.”
Avalani told TechRepublic by email that a lack of financial support and gender bias presented two of the biggest challenges facing female entrepreneurs, citing a Beauhurst report that found that less than 2p (2.5 cents) of every pound UK equity funding was earmarked for all-female founding companies in 2022.
“Investors and companies can offer significant help by supporting women-led businesses, giving them the opportunity to bring more diverse products and services to market and generate financial and economic benefits,” Avaliani said.
Removing barriers, improving access to networks and celebrating role models are also key strategies to improve gender diversity in the deep tech sector, Avaliani said, pointing to initiatives such as Diversity VC and Future VC, which focus on increasing diversity in the venture capital process.
“There is still a lack of diversity in the investment community,” he added.
“Significant systemic changes are needed to achieve the radical change that is required if we are to move forward. This ranges from hiring diverse talent to investing in founders from underrepresented groups, collecting data on diversity of portfolio companies, diversity of their own teams, and committing to measuring progress.”
At a glance: the UK’s deep tech sector
The report found that cleantech and AI currently dominate the UK deeptech sector, represented by 517 companies and 504 companies respectively.
AI is being widely leveraged for applications such as manufacturing and drug discovery, according to the report, and the UK government has invested heavily in AI initiatives in recent months.
The growing urgency to address environmental challenges is also driving demand from the UK’s advanced technology sector, especially in clean technology, clean energy generation and energy reduction technology, according to the report.
This has been driven in part by strong government and regulatory support, as the UK Department for Business, Energy and Industrial Strategy’s Energy Innovation Program has earmarked £505 million ($638 million) to fund the commercialization of technologies. of clean energy between 2015 and 2021.
The report flagged wider funding challenges in the UK deep tech sector. While capital investment in deep tech has grown considerably over the past decade – from £174 million ($220 million) to more than £5 billion ($6.3 billion) – 2022 saw a slight decrease in the total number of agreements.
RAEng said this was due to “a complex financing environment” and broader economic challenges that meant investors were being more cautious with their money.
Report methodology
The State of UK Deep Tech report was based on data commissioned from Beauhurst, a data platform that provides insights into private companies in the UK.
Companies in the UK deep tech sector were identified using Beauhurst’s high-growth tracking criteria, which includes things like equity investment, accelerator attendance and academic spin-outs. The report included companies incorporated on or after January 1, 2013, which were classified according to specific Standard Industrial Classification codes or sector classifications relevant to deep technology. Companies that offer consulting services or pure software were not included.
