A report from The Alan Turing Institute has highlighted the stark gender imbalance in artificial intelligence funding in the U.K., revealing that companies founded by women secured just 0.3% of the £69.5 billion ($85.1 billion) of venture capital raised by U.K. AI startups over the past decade. The research was conducted by The Alan Turing Institute’s Women in Data Science and AI team using data from capital markets firm PitchBook.
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By the numbers: Gender imbalance in AI funding in the U.K.
The report, Rebalancing Innovation: Women, AI and Venture Capital in the UK, found that the average deal capital raised by a female-founded AI company in the U.K. between 2012 and 2022 was £1.3 million ($1.6 million) – six times lower than the £8.6 million ($10.5 million) raised by all-male founder teams over the same period (Figure A).
Figure A
It also found that, within the same period, startups with all-female founder teams accounted for just 2.1% of all funding deals. In contrast, 79.6% of deals were with AI companies founded by men, which managed to secure 79.3% (£55.1 billion/ $67.3 billion) of the total capital invested in the sector.
The researchers highlighted the urgency of addressing gender imbalances in AI funding in tackling the wider underrepresentation of women in the industry and in shaping responsible AI design in the context of the industry’s recent rapid growth.
While AI software is booming globally, the report found that all-female teams raised less than half a percent – or £150 million ($183 million) – of the £35 billion ($42.8 billion) invested in AI software in the U.K. over the past decade (Figure B).
Figure B
“With the explosion of generative AI (such as ChatGPT), the need to ensure that women and marginalized groups have an equal place in the VC ecosystem and tech entrepreneurship more widely is urgent,” the report said. “VC investors have a disproportionate impact on the culture, products and services of the companies in which they invest. At a time when AI development is exponential, this has never been more important.”
Women under-represented in senior investor roles
According to 2021 data from CrunchBase cited in the report, the U.K. is the largest venture capital market in Europe and ranks third globally. Despite the number of female-founded AI companies in the U.K. doubling between 2018 and 2022, the report found that just 11% of VC funding went to startups with at least one female founder in 2022, while 77% went to companies founded entirely by men.
Women are also massively under-represented in the VC industry, with the report revealing that women comprise 20% of investment roles in the U.K.’s VC labor force and just 12% of senior investor roles.
In the U.K., firms with equal or majority representation of women at the decision-maker level constitute just 4.5% of all VC firms, the report found (Figure C).
Figure C
This is mirrored in investment trends, with the data showing that VC firms in which women had equal or majority representation at the decision-making level accounted for just 3% of total capital invested in AI. These firms participated in just 3.9% of all investment deals from 2012 to 2022.
Potential harm resulting from lack of gender diversity in AI
Dr. Erin Young, research fellow at The Alan Turing Institute and project co-lead, noted that equal representation and participation in both AI development and funding are important for preventing harmful biases in AI systems and ensuring designs are safe, responsible and equitable.
“It’s crucial to consider what’s happening in the whole AI ecosystem when thinking about designing and implementing safe and responsible AI systems. This includes the data being used to train models and the design of algorithms – but this also obviously includes who is funding and building these technologies, bringing their own priorities and value systems,” Dr. Young told TechRepublic via email.
“The lack of diversity in the AI and VC industries, including the under-representation of women, can result in potentially harmful feedback loops of biases being built into machine learning systems. Indeed, VC investors have a huge impact on the business models and growth trajectories, as well as culture, products and services of the AI companies in which they invest.”
‘Embedded industry cultures’ are challenging progress for female entrepreneurs
The U.K. government has invested substantially in AI and data science technologies in recent years, with both of the country’s main political parties viewing AI as a critical tool for boosting private sector investment as well as for modernizing aging public systems like the U.K.’s National Health Service.
While there are a number of ongoing initiatives to boost female entrepreneurship and promote equality and diversity in this space, the report found that work focusing specifically on AI investment was lacking when compared to the U.S., where “a focus on diversity in innovation is developing.”
“For example, California is on the verge of passing legislation that would require VC firms to disclose the gender and race of the founders in which they invest,” said Dr. Young.
In the U.K., initiatives like the Rose Review and Investing in Women Code have been established to identify barriers faced by women in the entrepreneurial space and promote more equal access to financial products and services, including early-stage funding.
However, Dr. Young noted that the biggest obstacles to reducing gender disparities in VC funding were structural and reflected “embedded industry cultures.”
She added: “Pipeline problems are also at play: having an entrepreneurship background is desirable for working in VC, but as our research found, fewer women entrepreneurs are being funded, which may create a feedback loop.”
Tips for curbing this gender imbalance in AI and VC
The report highlighted several recommendations for curbing the gender imbalance in AI and VC companies, including improving recruitment and promotion processes and monitoring investment practices to ensure equal opportunities for women in leadership and decision-making partner roles.
Dr. Young said VC firms could also revisit how they monitored their investments so they could identify any disparities in funding allocations. Gender lens investing, an investment strategy that considers the gender impact of investments, could also help minimize biases in investment decisions and ensure a more equal AI and tech landscape, the report noted.
“Finally, firms can build and strengthen relationships with broader tech and entrepreneurial communities to widen access to both investor and founder talent,” said Dr. Young.
“A committed focus on supporting women investors and founders in AI, including targeted interventions and access to mentorship and networks, may begin to mitigate these challenges.”
Source: TechRepublic
