The UK's most entrepreneurial communities are raising the least capital

In 2023, the UK's early-stage entrepreneurial activity rate for ethnically diverse adults was 18.7%. For white adults, it was 9%. Yet between 2013 and 2023 they received funding in just 11% of UK VC rounds. The gap isn't a pipeline issue, it's a structural one.

Nell Daly is Co-Founder and Managing Director at Revenge Capital, a fund built specifically to back founders that the rest of the market overlooks. She told us:

"The most common misconception I hear is that investing in underrepresented founders is a thematic choice, when in reality it's a correction to a system that has historically overlooked where strong companies are actually being built."

That reframe is the right starting point. Most of the time the conversation around diverse founders gets filed under ethics or DEI. It's not really an ethics question, it's a market efficiency one, and the data has been catching up for years.

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The most entrepreneurial communities in the UK are raising the least capital

Ethnically diverse founders are 1.6 to 1.8 times more likely to start early-stage businesses than their white counterparts. Between 2013 and 2023 they received funding in 11% of VC rounds and captured 9% of total investment value. They make up 18% of the UK population and roughly 40% of London's, where most venture activity actually happens.¹

Founders from these communities are building at almost twice the rate of their white peers, but the capital isn't reaching them.

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Why venture capital follows networks, not just merit

Warm introductions aren't a tiebreaker in UK fundraising, they're the deciding factor. Research cited by the Startup Coalition found that 76% of deals reaching investment committee, and 81% of funded deals, originally came from warm sources. Cold pitches make up around half of the decks investors receive, and only 11% of funded deals.¹

We've covered what warm introductions actually are before, but this piece is about who gets access to them by default, and why.

77% of UK VC firms are based in London,¹ a city where ~45% of the population is ethnically diverse. The people controlling access to capital don't fully reflect the city they're operating in, and it shows up in who can actually get an introduction. Founding teams from Black and other ethnically diverse backgrounds are 10% less likely than all-white teams to have a contact they could ask.¹

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The pattern recognition problem

This is where the system gets stuck. Jordan Dargue, co-founder of Lifted Ventures, spells it out:

"Venture capital is still largely driven by pattern recognition. People backing founders who look like the ones who succeeded before. The problem is that pattern has been historically narrow."

When the people writing cheques have learned to recognise success from a narrow set of examples, the same kinds of founders keep getting funded, and the same kinds keep getting missed.

1 in 3 UK VCs cite "lack of deal quality" as their biggest challenge.⁵ When pattern recognition has been trained on a narrow set of inputs, of course deal quality can look scarce. The deals are out there, perhaps the system just isn't built to see them.

The gap doesn't close as businesses grow, it widens. Ethnically diverse-led businesses receive 10% of capital at Series A, B and C. Black founders received 1.6% of VC rounds over the past decade, and Black women just 0.14%.¹ Only 2% of all UK VC goes to fully female-founded teams.²

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This isn't a moral argument, it's a commercial one

The case for changing this isn't sentimental. Jordan again:

"Diverse teams consistently outperform. They build more resilient businesses, they understand broader customer bases, and they often generate stronger returns. That makes this not just a moral case, it's a commercial one. As an investor, ignoring that is simply inefficient."

The Rise Report 2026 puts a number on what the gender gap alone is costing: a £310bn potential boost to the UK economy if female founders started and scaled at the same rate as men, with the equivalent of 1.1 million missing female-led businesses sitting between today and that number.² The Startup Coalition's December 2025 report comes to a similar conclusion on the ethnicity side: "This is not simply a question of fairness. It represents a material growth deficit for the UK economy."¹

When capital concentrates in the people and places it already knows, the most entrepreneurial communities in the country get locked out of it.

How we frame that gap decides who feels responsible for closing it. As a fairness debate, it sits with policy teams and DEI leads. As a market efficiency problem, it lands on the desk of every UK fund manager.

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What the market is actually missing

The clearest framing of all of this comes from Jordan one more time:

"The market isn't just underfunding diverse founders, it's underestimating them. And that gap is exactly where the opportunity lies."

That's the part I want investors and founders to sit with. The capital that doesn't reach these founders isn't being saved, it's being missed. The businesses don't disappear, they get built later, slower, with less capital, by founders who eventually find a way through. The investors who back them earlier are the ones who'll write a different pattern.

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What's changing, and what still needs to

Some of the response is starting to land. In July 2025, the government committed £500m to back underrepresented fund managers,³ including a further £50m for female-led VC funds. The British Business Bank's Investor Pathways Capital initiative opened Microfund applications in November 2025,⁴ targeting first-time managers from underrepresented backgrounds.

The logic is direct. Fund managers invest through their networks. Change who holds the capital, and you change whose deals reach investment committee. It's how you widen pattern recognition at the level it actually gets applied.

But policy at the LP level takes years to reach early-stage founders. The faster fix is removing the dependency on informal networks at the point where it matters: deal access.

That's what we're building at ThatRound. An open marketplace for early-stage fundraising, an open marketplace where any founder can see which investors actually fit their round, and apply directly. Matching on fit, not on who introduced you.

When the marketplace is open, the network stops being the barrier. The dataset widens, and the pattern actually changes.

If you're raising, you shouldn't have to know the right people to get in front of the right investors. ThatRound is the open marketplace that changes that. See who's a fit for your round or request a demo with one of the team to find out more.

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References

1. The Diversity Deficit: Unlocking the Potential of Ethnically Diverse Founders | Startup Coalition, December 2025
2. The Rise Report 2026 | Female Founders Rise
3. £500 million government investment to boost growth and opportunity for underrepresented entrepreneurs | GOV.UK, July 2025
4. British Business Bank opens Microfund applications as part of new Investor Pathways Capital initiative | British Business Bank, November 2025
5. Tech Nation Report 2025 | Tech Nation