Thanks to broader trends and a handful of all-female networks, angel investing is (slowly) becoming less of an old boys’ club.
If you thought the numbers when it comes to women working in tech and startups were grim, take a look at the number of women investing in them. Google, Facebook and the like may be criticised for the fact that only around 30–40% of their workforce is female (and much less than that in technical roles), but in the world of investment those numbers would represent an astronomical improvement.
Today in the US only one in five angels is female; in the UK it’s one in seven. Just ~6% of partners at venture capital firms are women.
That’s the bad news. But here’s the good news – while the diversity stats at tech companies are proving remarkably hard to change, the number of women angels, while still low, actually represents impressive gains. In an industry with a stubborn diversity problem, angel investing is a bright spot of progress.
‘Three years ago when we were founded, 13% of angel investors nationally were women. There was a huge divide,’ reports Miriam Bekkouche, Program Director of New York-based, all-female angel network 37 Angels. (The group’s name represents the difference between that initial figure of 13% and a far fairer 50%.) Today the number is around 20–22%, depending on which report you read.
How about in Britain? ‘Addidi Angels was the first female angel club, originally founded in 2009. At that time, less than 5% of angel investors were women and the club was set up with the specific objective of increasing that to 15%,’ explains Anna Sofat, Founder of Addidi, a female-focused wealth management firm that started one of the UK’s original female angel networks. She’s largely achieved her target – according to the UK Business Angels Association, women now make up 14.1% of British angels.
Women angel networks
While clearly there’s still much work to be done, angel investing has come a long way relatively quickly. What’s behind this striking improvement in the numbers? Networks like 37 Angels, Addidi Angels, Broadway Angels and Pipeline Angels can claim plenty of credit. They provide not only education for women considering getting involved in angel investing, but also a safe and supportive space in which to get started.
Prior to these networks, women often felt less than comfortable in the angel investing community. ‘Those that tried [traditional angel networks] didn’t enjoy it because they were typically male, typically slightly older,’ reports Sofat. 37 Angels Founder and angel investor Angela Lee tells stories of walking into investor meetings full of ‘old white men’ and being asked if she was lost or who she worked for. This obviously wasn’t the ideal environment to put new women angels at ease.
But all-female networks don’t just encourage women to get involved by providing more friendly faces (and fewer inane questions), they also offer a slightly different approach to angel investing that tends to appeal more to female angels – one that’s more deliberative and collaborative.
‘When we were looking at this space when Angela was founding the network, it was apparent that there was a very different mindset for women,’ reports Bekkouche. ‘Women expressed a desire to have more information upfront, to really understand what they were getting into rather than jump in and take the risk without the appropriate context.’ Sofat also found when setting up Addidi Angels that the quick decisions (along with anti-social hours and large commitments of time and money) typical of traditional angel networks were putting off women.
‘Women are excited to be connecting with other women because of the way they want to talk about companies.’
All-male gatherings and a shoot-from-the-hip approach to decision-making weren’t the only issues many women had with angel investing as it was traditionally practised. Many also weren’t terribly fond of the competitive feel of the whole enterprise.
At 37 Angels ‘women are excited to be connecting with other women because of the way they want to talk about companies’, says Bekkouche. ‘There’s a strong desire to be part of a community where they can really let every conversation be a learning experience, not just a forum to show their prowess, which tends to be the case when it’s more male dominated.’
The (long) road ahead
Of course, 15% or 20% is still quite a ways from 50%. And with women now controlling around half of the wealth in the US and UK, their under-participation in angel investing means businesses are losing out on vast amounts of potential capital. Too many female would-be angels remain unaware of the opportunities presented by the asset class.
Still, there’s good reason to be optimistic about the future. For one, women investors are more likely to invest in women. One study, for instance, shows that if a woman entrepreneur approaches a venture capital firm with at least one female partner, her chance of receiving funding triples compared to her odds at an all-male firm. Both Bekkouche and Sofat report that a number of women angels in their networks (though by no means all of them) likewise have an interest in supporting women-led businesses.
If a woman entrepreneur approaches a venture capital firm with at least one female partner, her chance of receiving funding triples compared to her odds at an all-male firm.
The growth in the number of female angels, then, is likely to lead to more successful female entrepreneurs. Couple this with the general growth in women’s wealth and professional accomplishments, and you have reason to hope for a more representative future for angel investing. ‘As more women businesses have exits, you now have a number who are also becoming superangels and reinvesting, and I think that trend will continue,’ says Sofat of the virtuous cycle hopefully being created by a more inclusive angel investing community.
Sofat is also heartened by other trends: ‘Crowdfunding certainly has brought knowledge of angel investing to more people.’
Thanks to this positive momentum, she’s now hoping to see women represent 30% of UK angels by 2020. 37 Angels, as its very name attests, has its eye on 50%. We’re not there yet, but we’re making progress.