J.P. Morgan report reveals struggles for top women-led firms

The report reveals the unique challenges facing women-led businesses compared to their male-counterparts

A second-annual Top 200 Female-Powered Businesses report by J.P. Morgan Private Bank has uncovered interesting findings about equity investment in women-led businesses versus men and the sectors in which women-powered firms are shining.

The report found that women-led businesses – high-growth companies founded or led by women, are majority-owned by women, or have a management team that is at least 50% female – are increasingly attracting large amounts of equity investment, which hit a record £5.05 billion in 2021.

However, women founders remain more vulnerable to equity dilution than their male counterparts. This means when women founders raise equity; they are more likely to give up a larger percentage of their business ownership than male founders. The rate at which women own less of their companies as equity investments increases almost twice that of men, equating to a 25% reduction compared to 13% for men.

This deficit for women-led businesses, according to J.P. Morgan, is down to a more “challenging fundraising landscape and a lack of resources” for women, which is “exacerbating the effect of equity financing.”

Charlotte Bobroff, Senior Advisor to women entrepreneurs across the UK at J.P. Morgan Private Bank, believes that women-led businesses can overcome equity dilution by receiving better advice at the beginning of their business journey and by structuring “their wealth efficiently to ensure they are in the best position at the point of negotiations and are exposed to female investors that understand the unique dynamics they face.”

Bobroff also outlines how the pandemic has disproportionately impacted employment prospects for women-led businesses compared to their male counterparts. She said: “Whilst more than 30% of high-growth companies powered by women reported increasing employment more than 20% over the last decade, employment growth versus men during the most recent filing period decreased nearly 42%.

“Whilst disappointing, it comes as no surprise that COVID-19 disproportionately impacted women, falling at a faster pace than male employment globally.”

In its second year, J.P.Morgan’s latest report analyses the 10,647 high-growth companies in the UK that are founded, led, owned or managed by women and then ranks the top 200 companies based on growth in sales, headcount and valuation – with Trinny London, Starling Bank and Lounge Underwear among the top 10.

“Since publishing our first report last May, it is encouraging to see that nine of the businesses recognised last year have successfully exited from the private space – three via IPO and six underwent an acquisition. Before exiting, these businesses raised more than £336 million of equity investment,” Bobroff said. “Seeing these success stories is conducive to changing the landscape of entrepreneurs in the UK,” Bobroff continued.

In the latest report, while digital sectors made up many companies powered by women in 2021, areas where women are traditionally well represented, like clothing, clothes shops, healthcare products and e-commerce, saw women-led businesses excel.

Out of the emerging sectors, artificial intelligence (301), fintech (224) and ed-tech (184) had the largest number of female-powered businesses, whilst the largest number as a percentage of high-growth businesses was the sharing economy (36.9%), eHealth (33.7%) and the “quantified self” (32.9%) sector.

The number one women-powered growing business on J.P. Morgan’s latest list is beauty brand, Trinny London, founded by TV presenter and personality Trinny Woodall. Commentary about the firm’s success and its ability to pivot through COVID-19 is below:

“Trinny London is not just female-founded, but the company is 85% female too. The dynamic of the people and personalities is key in a business that comprises a majority of women.

“For hiring, thinking of that balance is key, irrespective of gender, to make sure different styles and personalities shine through. It is a journey getting to the stage where you have a physical product that meets both the expectations and quality of the vision.

“When COVID-19 hit, we were in a completely unknown circumstance and pivoted the business throughout this growth phase, creating 3,000 virtual appointments in a day and grew our customer base – the Trinny Tribe – from 95,000 to 250,000 in one year.

“In a post-COVID world, we must think about how teams work in different ways and be able to provide that flexibility for working environments, whilst placing a huge focus on having those water-cooler moments to spark innovative ideas.”

To read the report in full, click here.

In this article, you learned that:

  • Women-led businesses are attracting more equity investment, which hit a record £5.05 billion in 2021.
  • However, women founders are more vulnerable to equity dilution than their male counterparts.
  • This is largely attributed to an unequal funding climate for women and a lack of access to solid advice from the outset of their business journey.
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