Female-led AI start-ups are being left behind in terms of investment funding, despite wider financing in the sector “booming”, a new report says.

A paper published on Tuesday by The Alan Turing Institute found that only 0.7% of venture capital investment in the AI software sector since 2010 had gone to female-led start-ups.

The report also highlighted that only 4% of start-ups in the sector were led by women, with all-male founding teams making up 78% and raising nearly 77% of the total capital invested.

Professor Judy Wajcman, lead author of the report said the lack of diversity in the sector “sells both women and the economy short”.

To cut the gender gap in the sector, the report recommends that investors ringfence investment capital for women and underrepresented entrepreneurs working in AI, and called for it to be mandatory for investors to collect and report their diversity data.

The research has been published to coincide with AIUK, a two-day conference on data science and AI being hosted by the Alan Turing Institute.

Artificial intelligence has become the key emerging technology globally, led by the rise of generative AI programmes such as ChatGPT and Google’s Gemini chatbots.

Dr Erin Young, report author and research fellow at the Alan Turing Institute, said: “We’re concerned that women-led startups are being left behind, and it’s particularly worrying in large sectors with high investment and little gender diversity like AI software.

“This sector is booming, experiencing enormous investment but almost all of the capital invested is being awarded to businesses founded only by men.

“Policy reform must focus on the inclusion of women and under-represented groups in this space to have tangible impact on equity and innovation.”

Professor Helen Margetts, the Institute’s public policy programme director, said: “The lack of gender diversity in technology, and specifically in AI, constrains the wide variety of perspectives needed to encourage innovation.

“This important research shows there’s a lot of work to be done but prioritising gender diversity is crucial to ensure we have a well-rounded and versatile economy.”