A cross-committee of MPs is urging Government to demand that venture capital firms publish their diversity statistics in order to qualify for tax breaks, such as SEIS and VCT.
Businesses with all-female founded teams received only two per cent of venture capital funding in 2021, with even less going to black and ethnic minority-led businesses.
The Treasury select committee said underrepresentation is holding the industry back, and that VC firms should adhere to the Investing in Women Code or explain why they are not doing so.
It was also suggested that Government and the British Business Bank consult with one another to create a fund focused on women and ethnic minority founders.
There can also be more done to help regional businesses, the committee found. Currently, 80 per cent of funding goes to firms in the ‘Golden Triangle’ of London, Cambridge and Oxford, despite these accounting for just 19 per cent of all small businesses.
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Other recommendations included an extension of the EIS sunset clause beyond the April 2025 deadline and extending the ages at which companies can apply for tax efficient venture capital funding.
Harriett Baldwin, chairwoman of the committee, was reported as saying in The Times: “In the 21st century, it shouldn’t come as a surprise to investors that women and those from ethnic minority backgrounds can start successful businesses.
“Given that public funds play a key role in the success of the UK’s venture capital sector, more must be done.”
More on diversity in venture capital
Women founders lose more when selling equity stakes – Women founders give up more in equity stakes than their male counterparts when selling to raise funds for their business
Cornerstone VC launches £20m fund for tech start-ups led by diverse teams – The fund will invest between £250,000 and £1m into 40 UK tech-enabled businesses at pre-seed and seed stage