Overall, angel investment in 2012 showed signs of weakness: fewer investors and only a slight increase in dollars invested. But for women angels, it’s a whole different story.
While the percent of women angel investors is still small — 22% — it jumped 50%, according to the Center for Venture Research, which studies early stage equity financing for high-growth ventures.
The significance goes beyond just putting cracks in the glass ceiling for women angels; these women are more likely than men to to invest in women-led companies and some will sit on the boards of the companies they invest in, according to the Kauffman Foundation, which researches and advocates on behalf of entrepreneurs. Women angel investments have a ripple effect on the companies they invest in.
Reasons why there are more women angels
“The women angel networks themselves are getting the word out about the importance of women participating in the investment process and are doing a great job at welcoming new women into the investing community,” said Susan Duffy, Executive Director, Center for Women’s Leadership, Babson College. “Golden Seeds is a great example of investors as ambassadors. These women routinely participate on conference panels, speak in university classrooms, and volunteer their time as mentors to both entrepreneurs and future investors.”
The number of women-led angel funds, such as Belle Capital, Golden Seeds, Texas Women’s Fund has increased, according to Kay Koplovitz, Chairman, Springboard Enterprises and Founder, USA Networks. “Angels are getting organized around specific sectors, too, and improving their due diligence process.”
“New organizations, such as the Pipeline Fellowship, are educating women on how to be angel investors, using a model that not only provides a hands-on approach to learning investing,” said Duffy. “It surrounds these would-be angels with a vibrant network of seasoned investor/mentors and technical experts from the entrepreneurial eco-system.”
Statistics show women are good investors
Some women-led businesses are out-earning men, but increasing those earnings returns through investing — not so much. Many of these women take a back seat and turn investing over to their husbands or a financial adviser, writes Susan Gregory Thomas in The Wall Street Journal.
But women are excellent investors, both professionally and personally. Women-owned or managed hedge funds perform better than the industry average, according to Rothstein Kass, a professional services provider to the financial services sector.
Women are better investors than the average man, according to LouAnn Lofton, author of Warren Buffett Invests Like a Girl — And Why You Should, Too. Women spend more time researching their investment choices, tend to take less risk than men do, and hold onto their investments longer. Women are also more likely to seek out information that challenges their assumptions.
Kelly Hoey,Connector, Catalyst and Co-Founder of Women Innovate Mobile (WIM) Accelerator, left the portfolio-management decisions to her investment advisor. That changed after she took part in a Pipeline Fellowship class. Not only did she learn to how to be an angel investor, but she now has confidence to actively manage her own investment portfolio.
Research finds women-led companies are good investments
“Women entrepreneurs have been absorbing the lessons from the marketplace at a rapid rate. They are going to accelerators like Springboard to learn best-in-class practices,” said Koplovitz. “Entrepreneurs have really come up the curve on how to make investor pitches and how to build scalable, saleable, investable businesses, said Peggy G. Wallace, Managing Director, Golden Seeds.
During the past decade or so, organizations such as Astia and Springboard have helped women entrepreneurs become more scalable and attract investment. Both organizations provide leadership training, access to capital, and connections to accelerate the growth of women-led companies. Astia companies have a 60% plus fundraising success rate within one year of joining and have raised $1 billion. Springboard companies have an 83% fundraising success rate and have raised $5.6 billion.
It’s not just Warren Buffett who is bullish on women. Male angel investors, such as Adam Quinton, are, too. The angel market’s failure to invest in promising women-led companies provides greater opportunity for him. Research supports Buffet and Quinton’s enthusiasm.
Venture capital firms that invest in women-led companies outperform those that don’t, according to research from the Small Business Administration’s Office of Advocacy.
Venture-backed companies that include more women on their executive management teams are more likely to succeed than companies with men-only executive suites, according to Women at the Wheel: Do Female Executives Drive Start-up Success, research conducted by Dow Jones.
The number of women-led companies attracting angels — both male and female — though small, has increased by more than 40%, according to the Center for Venture Research.
Getting more women on corporate boards
Women held only 17% of board seats at public companies in 2012 — the seventh consecutive year of no-growth, according to Catalyst, which is dedicated to expanding opportunities for women in business.
“Golden Seeds has over 30 board seats on high-growth companies because our investment activities allow us to obtain board seats”, said Wallace. When women angels get on boards, there is a spillover effect. Startups grow into bigger companies, get acquired, and go public. Women on these startup boards may graduate to being on the boards of more established companies, said Jeffrey Sohl, Director of the Center for Venture Research.
We’ve come a long way, but we still have a long way to go
Progress has been made, but there is still much work that needs to be done. “We need to continue to build out the ecosystem so that women are an active part of the funding cycle. We still have a long way to go,” said Wallace. “Female entrepreneurs still do not fit the typical profile of a young, tech male. Investors need to be open to diversity of ideas, age, geography. We need a more open environment.”
“Keep building our networks of investors, both women and men, who see women as competent entrepreneurs who can scale businesses,” said Koplovitz.
“Funding at angel and venture levels is still a high-testosterone business with networks dominated by men,” said Koplovitz. “The more investors make desirable returns by investing in women-led businesses, the greater the acceptance will become. We need more stories about success and not just about the barriers.”
Want more women running high growth companies?
“Get the word out as early as possible, for example, Girl Empower: The NFTE Summer Camp Experience for 7th and 8th grade girls. Tech girls, and the other interesting programs emerging for young women,” said Duffy. Girls Scouts start even younger. Selling cookies teaches girls goal-setting, decision-making, money-management, people skills, and business ethics.
Women need to take charge of their portfolios. Risk-averse women need to become risk astute by seeking out reliable financial advisers and being proactive in managing their portfolios. That may include investing a portion of their portfolio in startups. Here are nine questions to ask yourself if you want to find out if angel investing is for you. Reach out through your social networks to find angel investors who can help you understand the risks and rewards, said Sohl. These men and women can become mentors, advisors, and collaborators.
I’ll keep writing about successful women entrepreneurs to give them visibility and chip away at the glass ceiling. How will you help women entrepreneurs shatter it?
Read Geri Stengel’s stories on women entrepreneurs’ success factors sooner by following her on Forbes.