A Missed Opportunity

The final Funding the Underfunded report - and why we saved class for last.

Just over a year ago, we launched Funding the Underfunded with a simple premise: the UK’s growth prospects are tied to the success of its venture-backed technology companies, and we are systematically failing to draw on the full depth of talent available to build them.

We picked four vectors - geography, gender, ethnicity and class - and committed to a report on each. We started with the regions, moved to gender, then ethnicity, and are concluding with class.

The more we worked across this series, the more convinced we became that class is what connects everything else. The working-class female founder from outside London who is also from an ethnically diverse background faces the risk capacity gap, the discriminatory practices, the access deficit, and the network disadvantage simultaneously. Class sits underneath all of it.

What the Data Shows

Our data comes from Social Mobility Ventures, who surveyed more than 4,000 UK founders for the first time and tracked their socioeconomic background against funding outcomes. The picture is stark. Private school founders are roughly 500% over-represented in the founder population relative to their share of the general population. Only 18% of founders come from working-class or low-income households, against 45% of the UK population. And just 20% of VCs attended non-selective state schools.

But the finding that matters most is not the snapshot. It’s where the loss happens.

At stealth stage - before any external capital has been raised - 40% of founders are state-school educated. By pre-seed, that figure has fallen to 25%. Half of state-school founders in the pre-funding pipeline drop out before a single round is raised. They drop out not because their ideas are weaker. They drop out because the friends-and-family round doesn’t exist for them. State-school founders are three times less likely to access friends-and-family capital. Among those who didn’t go straight to VC, 46% said friends and family simply couldn’t afford to invest, compared to just 5% of private-school founders. And 43% delay going full-time by more than six months - every one of those months a month their company falls further behind.

As one founder put it in our roundtables:

“The safety net isn’t there. The risk of starting a company isn’t the same risk for everyone.”

There’s a psychological dimension to this that I think gets under-discussed. When you’re new to this world and you watch peers seemingly glide from idea to first cheque, it’s easy to draw the wrong conclusion - that the difference is the quality of your idea, or your own capability, rather than the network quietly working behind the scenes. Founders who don’t know what they don’t have access to don’t just miss the money. They talk themselves out of the room before anyone else has the chance to.

What We Tried to Do Differently

One thing I wanted this report to do was take the economics seriously enough to be quantified - and honest enough to show our working. We cross-referenced SMV’s data with investment figures to estimate the scale of the missed opportunity. We estimate the UK is missing approximately 1,000 state-school founded companies. Around £50 million in direct pre-seed capital is not being deployed annually. A full methodology annex shows how we got there, what the limitations are, and what the honest range is.

The performance data is also worth sitting with carefully. Once state-school founders make it into the pipeline, they are 30% more likely to reach Series A and beyond. Their share of the cohort grows from 25% at pre-seed to 42% at Series C. But - and this is important - that outperformance likely reflects the brutality of the filter they’ve had to clear. The founders currently getting through are, almost by definition, exceptional. The ones who would come through if the barriers were removed don’t need to be exceptional. They just need to be as capable as the average private-school founder who walks in the door with half the friction. There’s every reason to think they are.

What We’re Calling For

The recommendations are practical and deliberately not expensive.

• A Theil Fellowship-style micro-grants scheme delivered through trusted community partners to bridge the stealth-to-pre-seed gap - the model already exists through the Tech Cluster Group’s Regional Tech Booster programmes, and organisations like Foundervine are already doing this work.

• Place-based accelerators in working-class communities.

• Reform of the sophisticated investor definition to widen who can become an angel - extending it to people who’ve worked five or more years at an EIS-eligible company, completed an angel programme, or been part of an angel group. As we set out in Girls Just Wanna Have Funding, this change makes the angel pool more inclusive without lowering standards. It applies just as directly to class as it does to gender.

Looking Forward

This is the final report in the Funding the Underfunded series. But it is not the end of the work. We have flagged a risk the data doesn’t yet allow us to fully evidence: as deep tech becomes a larger share of UK VC activity, the class gap risks getting harder to close. The route into deep tech founding runs through a PhD. IFS research shows students from the highest socioeconomic groups are four times more likely to progress to postgraduate study than those from the lowest. That compounding filter is one we intend to investigate in the next phase of this work. If you’re working in this space, we want to hear from you.

More immediately, we will be pushing for the recommendations across all four reports to be acted on. The BBB’s emerging manager initiative is a start. The Women in Tech Taskforce sub-group that Startup Coalition is now embedded in is another. The campaign continues.

Missed Opportunity: The Untapped Potential of Working Class Founders can be found here.