Only 18.3% of all lawtech ventures have at least one female founder: we need to do better

The legal sector, traditionally perceived as conservative and resistant to change, is in the midst of a significant transformation. The rise of lawtech is at the forefront of this transformation. The emergence of new technologies such as generative AI are fuelling innovative solutions that are making legal services more efficient, accessible, and affordable. The annual demand for lawtech in the UK is estimated to be worth up to £22 billion. The UK is home to 44% of all lawtech startups headquartered in Europe.

The UK has positioned itself as one of the world-leading hubs for lawtech innovations, investments, and collaborations. The government has taken a proactive approach to supporting the sector’s growth, exemplified by initiatives like LawtechUK. Set up in 2018, LawtechUK is a Ministry of Justice backed initiative dedicated to driving digital transformation in the legal sector. I am one of the most recently appointed members of the LawtechUK Panel, which serves as its advisory board. 

As a lawyer and professor who founded Oxford’s first lawtech lab and, later on, an all women-founded AI startup, I am very much aware of the gender disparity in lawtech. Women make out 35% of partners in law firms in the UK. However, only 18.3% of all lawtech ventures have at least one female founder.

The challenges faced by female lawtech entrepreneurs are multifaceted.

First and foremost, securing funding to grow and scale a venture is one of the most significant roadblocks for women founders. According to the British Business Bank, for every £1 of equity investment in the UK in 2021, all-female founder teams received 2p. This is similar to equity investment in ventures founded by entrepreneurs from ethnic minority backgrounds.

A study commissioned by the SRA found that only 8% of lawtech venture funding went to female funders (from a sample of 90 lawtech ventures in the UK). The study also pointed out that female founders clustered mainly in ‘PeopleLaw’, referring to the individual and small business client segment of the lawtech market. When compared to ventures that focused on the ‘BigLaw’ corporate-client facing segment, PeopleLaw ventures tended to be less appealing to investors.

A female lawtech founder interviewed for the above SRA study said they intentionally opted for debt financing from a bank that uses ‘an algorithm rather than a human to make funding decisions’. Her reason for this choice? Based on this process, ‘they (the bank) fund way more women than anybody else, just based on the numbers’.

Sub- or unconscious gender bias can often be found in the funding process. When I raised capital for a startup I co-founded with another female entrepreneur from Oxford, I learned about the different types of investor questions to male and female founders when pitching. Men were constantly asked ‘promotion’ questions surrounding potential gains and growth. Meanwhile, women were asked more ‘prevention’ questions regarding potential losses. And the ‘so what’? Founders who were asked more promotion questions are more likely to raise more money.

There are other challenges. The demanding nature of startups, combined with societal expectations and responsibilities, can sometimes deter women from taking the entrepreneurial plunge. At the same time, the rigidity of a traditional legal career can also encourage some women to go into entrepreneurship. The reality is that there is still a long way to go in addressing the gender underrepresentation gap in lawtech. A lack of female mentors and role models in the sector as well as limited business support networks can further discourage women from entering and thriving in this space.

The future of lawtech is not just about the technology. It is about the people who drive the technology, and the people that the technology will benefit.

Addressing the gender disparity in lawtech entrepreneurship is not just a matter of equity, inclusion, and fairness; it’s a matter of harnessing diverse talent to foster innovation and growth. Studies have shown that, on average, startups (co)founded by women delivered better returns for investors.

How can we foster an environment where women-founded and women-led lawtech ventures, whether in ‘PeopleLaw’ or ‘BigLaw’, can thrive?

• Understanding barriers: It is crucial for everyone involved in the sector to gain a deeper understanding of the specific challenges that hinder women entrepreneurs from accessing equal funding, mentorship, and resources.
• Setting goals for the sector: While there are growing programs and initiatives to support women entrepreneurs (largely around mentoring and networking), there has been little impetus within the sector to set and actively pursue goals and metrics to measure progress.
• Addressing bias in funding: Greater awareness and education about unconscious bias in the funding process could lead to good practices that focus on objective criteria. Some VCs and funders have even moved towards ‘pitch-less’ investment processes and having gender diversity in leadership teams as a factor in investment decisions.

For the UK lawtech sector to reach its full potential, the gender disparity in lawtech entrepreneurship must be addressed head-on. As the sector rapidly evolves, it is not enough for women to merely be participants; they must be catalysts, driving innovation and shaping its very future.

Professor Mimi Zou is a LawtechUK panel member and founder of a lawtech startup