What do you need to found a startup? ‘A good sense of timing’, says Forbes. ‘An itch to scratch’, says TechCrunch founder Michael Arrington. And for the President of the Trump Organisation and the United States, it’s very simple: 'As long as you’re going to be thinking anyway, think big.'
Our analysis of high-growth UK startups and scaleups suggests that before getting to the timing, itching, or thinking stages, you may need some other fundamentals in place: maleness, to begin with, and a little later, a university degree.
As part of our effort to find out who becomes an innovator in the UK, we’re looking at three types of innovation activity: invention (measured by patenting), entrepreneurship (founding an innovative business) and social entrepreneurship (founding an innovative social venture).
We analysed Beauhurst’s database of over 19,000 startups, their teams and their founders. Here’s what we learned about diversity in the startups sector.
The Beauhurst dataset includes company ID, status, sector, and the names and genders of senior figures in the company (usually including founder and CEO). This allowed us to generate initial findings on women’s participation in UK startups: to what extent they’re involved in this high-growth activity, and in which sectors within it.
We found men make up 82% of all individuals named in the dataset, with a similar proportion amongst founders (83% being men).
Over half (57%) of all leadership teams in the dataset are all-male, while only 7% are all-female.
In the Beauhurst dataset there are no sectors in which female founders outnumber male. The most gender-balanced sector is craft industries - the smallest sector within the dataset - in which women make up 49% of founders. Supply chain businesses are the least gender-balanced, with 91% of founders being men. In personal services, which are mainly education and healthcare service businesses, women account for around a quarter of founders.
Beauhurst has collected founders’ LinkedIn profiles, which allowed us to look at founders’ educational background to add another dimension to the picture of the field of startup leadership.
We took a random sample of 100 companies, and manually added data from founders’ LinkedIn profiles on a) whether or not a founder attended university, b) where they attended university, and c) what subject they studied (and the same for postgraduate study). From this sample of 100 companies, we collected data on 154 founders: 120 men and 34 women. We identified university non-attendance where there is no gap in time between finishing secondary or further education and entering first employment.
There was relevant data on education background for 118 of these individuals: 85 men and 25 women went to university, and 8 founders (all men) went straight into employment. For the remaining 36 there was no data on LinkedIn. This means that of the founders for whom we have data, 93% are graduates (91% of male founders and 100% of female founders). 43% of founders have postgraduate qualifications as well.
Around 30% of the UK population are graduates - so over 90% in (this sample of) startup founders is high. In a comparable field, the creative industries, the graduate proportion of the workforce is just over 60%. This might tell us that these lines of work are rarified, demanding certain levels and types of skills and knowledge. However, bearing in mind that access to university in the UK, and especially to prestigious institutions such as the Russell Group, is far from a level playing field, we might question how diverse the startups sector can really be in terms of life experience and socioeconomic background if this preponderance of the university-educated holds beyond this sample.
Founders within our random sample studied a very broad range of subjects: 58 different degree subjects ranging from Engineering, Law or Natural Sciences degrees to combinations such as English Literature and Business Management, Engineering and European Studies, and even Cognitive Studies and Dance. There were takers for everything from Nutrition to Molecular Genetics, Chinese Studies and Speech and Language Therapy.
To see whether and how degree discipline maps onto founders’ sectors of activity, we grouped degree fields into humanities and sciences. We can only make tentative hypotheses from our sample of 118 about how dynamics might play out in the wider population of startup founders, but it is interesting to note that there is no commanding tendency in our sample towards very technical degrees - indeed, 54% of founders studied humanities subjects.
Among technology/IP-based businesses a small majority of founders had science degrees, while the opposite was true in the industrials sector (mainly manufacturing and engineering businesses) and business and professional services.
If the patterns observed in our sample hold for the wider population of startup founders, they might suggest that startups allow for a certain amount of generalist engagement. This in turn might suggest that disciplines of study are not always key in conferring the knowledge and skills for startup success, but that something about the experience of university - perhaps the networks and credibility that it might bring - is also salient in startup-founding.
There is one very clear message from the data presented above: women are seriously underrepresented among startup founders. Why should we care about this? This is partly an economic problem. There is no lack of entrepreneurial ambition in women in the UK - 1 in 8 working women wants to start her own business (compared with 1 in 6 men) - so this suggests that we’re failing to capitalise on a lot of talent. The startups sector is also where we look to for disruptive, high-growth-potential businesses. If the people founding these businesses come from a narrow range of backgrounds, it’s possible that the problems they choose to solve - the itches they choose to scratch, in Arrington’s words - reflect relatively narrow experiences and viewpoints. And it may be holding businesses back too: other research suggests that a lack of diversity within companies may hinder innovation.
Part of the solution is surely to tackle barriers to success in startups for women and other under-represented groups, such as well-documented problems of access to funding, venture capital and angel investment. The Women in Innovation programme, for example, has helped increase the proportion of women-led businesses receiving government funding from Innovate UK.
But there’s a strong argument that changing this picture requires much earlier intervention as well. Given a degree appears to be so important, improving access to higher education for under-represented groups seems an important step. But since women in the UK are currently enrolling in higher education in greater numbers than men, there are clearly other issues at play too. Some subject choices are highly gendered - for example, boys vastly outnumber girls in maths and computer science at A-level, while girls outnumber boys in subjects such as psychology and sociology. However, the issue is not simply about subject choices, as startup founders study a wide range of disciplines.
Research from the United States suggests that exposure to innovation in childhood (for example, growing up in an area where there is a higher concentration of inventors, or having parents working in innovative fields) has a significant effect on likelihood to become an inventor. We’re researching this as part of our project on exposure to innovation. Over the next few months we’ll be publishing more findings on participation in innovation, as well as exploring interventions and initiatives that work with school-age children and young people (5-19 year olds) to increase participation in innovation in the UK.