Unintended consequences for women investors and founders

I was fortunate to have had the opportunity to attend a lunch and learn session where Gillian Fleming, CEO of Mint Ventures, spoke to Harper Macleod colleagues about women in the equity investment space and making angel investment more accessible for women. The session focused on the lack of opportunity for women to access angel investment, with discussions around a new amendment to current legislation which came into force on 31 January 2024, creating more boundaries and less opportunity for women in this space.

Before discussing the potential and unintended consequences of the recent amendment, it is important to be aware of the position before this amendment.

A few important statistics to note:

• Only 14% of angel investors in the UK are women.
• Between 2012 and 2021, women angels plugged £2.34bn into 4,149 UK businesses.
• Over the past decade, women angels have been involved in deals worth more than £2bn, helping to create more jobs and supporting more than £1,000 female-founded businesses;
• Women start companies with 53% less capital than men.
• Women-founded companies in Europe are critically underfunded compared to their male counterparts, receiving 1.3% of VC funding between 2017 and 2021.

With these statistics in mind, it is clear that women already face multiple barriers without this new amendment, whether this is as a business founder or as an angel investor. The small and now decreasing number of women angel investors is limiting funding and entrepreneurial growth in the UK. A significant proportion of women angels' investments are made in women-founded businesses, meaning that women founders now have less access to capital. However, angel investors provide more than just vital funding to these companies, they offer support and experience, helping businesses grow and prosper.

On the 31st of January 2024, an amendment to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 came into force, highly impacting women's ability to invest in companies, leading to fewer investment opportunities. The new legislation is changing the criteria required for the current exemptions which are relied upon by Angel syndicates and VC investors. Before the amendment, a high-net-worth individual was classified as having an annual salary of £100k, which has now increased to 170k. This amendment is excluding to women, leaving only a small number of women in the UK, and none in Northern Ireland, able to qualify for the exemptions under this legislation, which will widen and reinforce the gender pay gap.

The long-term effects on the UK economy are yet to be seen but one can only assume that the damage will be difficult to overcome. 

• Women Angel Insights: The impact of female angels on the UK economy https://ukbaa.org.uk/wp-content/uploads/2022/09/Women-Angel-Insights%E2%80%94The- impact-of-female-angels-on-the-UK-economy%E2%80%942022-report-final.pdf 
• The Alison Rose Review of Female Entrepreneurship https://assets.publishing.service.gov.uk/media/5c8147e2e5274a2a595bb24a/RoseReview_Digital_FINAL.PDF
• The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023                                                 https://www.legislation.gov.uk/uksi/2023/1411/made