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How Entrepreneurship & Angel Investing Cut Barriers For Women

Posted by Early Growth

June 30, 2015    |     6-minute read (1114 words)

This guest post by Geri Stengel was originally published on Forbes.

Opportunities are growing for women to sidestep the glass ceiling and steer clear of the glass cliff, that corporate “opportunity” for leadership given to women and minorities when there is high risk of failure due to a crisis created by former leaders or because needed resources aren’t given.

The opportunities come from the ever-growing awareness among angel investors that women-led startups are good investments. And the awareness among women that entrepreneurship gives them control of their own destinies. No more cleaning up other people’s messes, just a great opportunity to strut your stuff while building your own wealth and the economy.

High-growth companies market innovative technologies, products, and business models. They also create jobs. Starting businesses has its risks: 50% of small businesses fail within their first five years. But with job security a thing of the past, controlling their own destiny is alluring for many. Women under 40 no longer aspire to the corner office as their top career choice, they want to strike out on their own, according to Cindi Leive, speaking on Bloomberg TV. Leive is editor-in-chief of Glamour.

Women-led companies with angel investors hit record-breaking levels

While the percent is still low—only 20% of all angel-backed companies were women-led in 2013—for the second year in a row, a record number of women-led companies received angel funding, according to Jeffrey E. Sohl, Director, Center for Venture Research, which researches trends in angel investments.

With more women getting STEM (science, technology, engineering and mathematics) degrees, he is cautiously optimistic that this trend will continue. Alicia Robb, senior fellow at the Kauffman Foundation, which advocates for and researches entrepreneurship, credits the increased number of high-growth women entrepreneur role models, who are showing other women how women just like them have succeeded despite the challenges.

It should be no surprise that angels are increasingly investing in women-led companies. These companies outperform others according to research conducted by Dow Jones VentureSource, Illuminate Ventures, Kauffman Foundation and the SBA Office of Advocacy.

Angels are wealthy individuals who invest their own money in startup companies in exchange for owning a piece of the business. There are exceptions but, for the most part, angels invest in the seed, startup, and early stages of a business; venture capitalists invest in the later stages.

The steady increase in the angel investor market during the past few years is a reflection of the stock market and improving economy, said Susan Preston, of the Angel Resource Institute, which provides education and information on angel investing best practices. When investors do well in the stock market, they diversify into additional areas, such as angel investing, she continued.

Female angel investors do not just chisel cracks in the glass ceiling, they help women fly right through it. Women are not only more likely than men to invest in women-led companies, some will sit on the boards of the companies they invest in, according to the Kauffman.

Women need to ante up

Like it or not, the reality is that people are more likely to invest in people who are like them. It’s called homophily, said Robb. People of the same gender, race, and/or ethnic group tend to associate and bond with each other. Angels are more likely to invest in startups founded by entrepreneurs who are of the same gender, according to research conducted by John Becker-Blease of Washington State University and Sohl.

What this means is that for more women to get funded, more women need to become angels. Trends in women’s wealth—women already control a majority of the country’s wealth and the percentage is only going to increase—bode well for more women to get involved in angel investing, said Preston.

The availability of online equity crowdfunding platforms, such as AngelList, CircleUp, and EarlyShares, make it easier than ever for angels to invest, she continued. I’ve written about Crowdnetic, a portal that makes it easy to compare investment opportunities across equity crowdfunding platforms. I’ve also written about Portfolia, which is geared toward investing in companies targeting consumers. Since women make 80% of consumer decisions, this should be a very appealing site to female angel investors.

Women tend to be timid investors and want to know what they’re doing before they get into angel investing. For them, training is essential, as Preston points out. She does a lot of training for women who become angel investors.

Educational initiatives are increasing

This year Pipeline Fellowship, a training program aimed at women interested in investing in socially responsible women-led companies, increased the number of cities it works in from Boston, Chicago, New York, San Francisco and Washington D.C. to include Atlanta, Austin, Los Angeles, Miami, and Seattle.

Recognizing the trends in women’s wealth, angel groups are increasingly looking to attract women by offering training, said Preston. Other training programs for women interested in angel investing include 37 Angels, a community of women investors who invest in early stage male- and female-led companies. Kauffman will be providing online training for aspiring angels as well. Preston is spearheading a new initiative called Women First Enterprises. It is an initiative of the Angel Resource Institute (of Kauffman Foundation origin) which is focused on educating and training women entrepreneurs and angel investors in the US and globally.

Men need to take their blinders off

Men still represent the vast majority—81%—of angel investors. Homophily be damned! Investing in women can increase the return on investment for male angels. Men like Rob Delman, Nnamdi Okike, Adam Quinton, and Dave Rose all know this. They invest in women-led companies.

“There is a lot of money out there to be invested in great ideas and innovations. The only thing that holds us back is not having the key to open up the coffers,” said Amy Millman, President of Springboard Enterprises, an accelerator for women-led businesses seeking equity financing.

Share your best tip for identifying new business opportunities in the comments section below or contact Early Growth Financial Services for financial and accounting support.

Geri Stengel is President of Ventureneer, a digital media and market research company that helps corporations reach small businesses through thought leadership. She is the author of Forget the Glass Ceiling: Build Your Business Without One, a book that provides women entrepreneurs with practical advice for overcoming the barriers to their success. She was also named a Small Business Influencer in both 2012 and 2013 for her articles about the success factors of women entrepreneurs. Follow her on Twitter @Ventureneer.

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