The Diversity Deficit
Today, Startup Coalition is publishing The Diversity Deficit: Unlocking the Potential of Ethnically Diverse Founders – a synthesis of the best available evidence on who gets funded in the UK, who does not, and why that gap matters not just for fairness, but for growth.
Ethnically diverse founders in Britain are almost twice as likely to engage in early-stage entrepreneurship than their white counterparts. They are among the UK’s most entrepreneurial communities.
Yet between 2013 and 2023:
Only 11% of venture capital rounds went to ethnically diverse founders, whilst making up 18% of the UK population and 40% in London
Just ~9% of total VC investment value was captured by those founders
The gap widens at Series A, B and C, precisely when firms need capital to scale
These outcomes are not explained by a lack of ambition, ideas, or entrepreneurial activity. They reflect how capital is allocated.
That makes this a structural failure of the ecosystem, and a material drag on the UK’s growth pipeline.
Bringing together quantitative datasets and extensive qualitative research with founders and investors, the report identifies three mutually reinforcing barriers.
1. Network exclusion
Venture funding is heavily shaped by informal pathways: warm introductions, social proof, and sponsorship. Warm intros account for over 80% of funded deals, yet ethnically diverse founders are systematically locked out of these routes.
2. Bias and pattern-matching
Heuristics like “founder-market fit” often become proxies for familiarity. Founders who do not match the prevailing template face higher scrutiny, narrower assumptions about their markets, and earlier rejection – even when targeting mainstream opportunities.
3. Information asymmetries
Founders without inherited access to venture knowledge face gaps in fundraising mechanics, deal structuring, and investor expectations. These disadvantages compound early and persist as companies try to scale.
Taken together, these forces create a system that looks neutral on the surface but reproduces unequal outcomes at every stage.
The report also highlights delivery models that convert ambition into scale – not through performative diversity initiatives, but through power, trust and capital. It sets out three practical recommendations:
Align BBB data collecting for large VC funds to improve transparency and accountability
Strategically back fund managers and ecosystem groups embedded in diaspora networks, leveraging the UK’s global market links to trade and investment opportunities
Fund trusted delivery partners to deploy micro-grants and pre-seed support, closing the gap between idea and investability
These are not radical interventions. They are targeted fixes to well-understood failures and they would materially strengthen the UK’s startup pipeline.