Differences in gender perspectives can be valuable when it comes to evaluating the products, markets, and management teams of new companies, according to a Ewing Marion Kauffman Foundation report on women angel investing.
The report, Women and Angel Investing: An Untapped Pool of Equity for Entrepreneurs, provides insights from leading women angels on how gender similarities and differences impact angel investing and addresses how increasing the pool of women angel investors can benefit high growth women entrepreneurs and in the evaluation of new business opportunities.
Of the estimated 225,000 active angels who invested $23.1 billion in nearly 50,000 entrepreneurial deals in 2005, no more than eight percent are female, as estimated by several reports. Women comprise about ten percent of the angels who belong to angel groups, and seven of the 250 angel groups in the nation are women angel groups, in which nearly all of the member investors are female.
The paper notes that while the number of women angels remains small relative to women´s collective wealth, education, and experience suggests, women angel groups along with other groups which have strong participation by women, stand out from most other angel groups in the following ways:
- The women-friendly groups tend to be more collaborative. They create a supportive environment that encourages questions from newcomers and also emphasizes respect for entrepreneurs.
- Women angels may consider a broader range of investment opportunities, and bring new perspectives to the evaluation process.
- They express a strong commitment to supporting women (and sometimes minority) entrepreneurs
- They emphasize angel education.
In addition to software and technology businesses, women´s groups´ portfolios include companies in such industries as banking, media, consumer products, healthcare and construction. Possibly because women make about 80 percent of household purchasing decisions, women angels recognize innovation and a potential to scale in certain products or markets that may be less evident to men or that the women investors have careers in those fields, according to the report. Some women angels, like many men, also express an interest in investing in scalable "green´ companies and businesses involved in social good.
The report — which summarizes the comments of leading women angels — details the factors that influence women to become angels; the dynamics that may inhibit women´s participation in angel investing; the valuable perspectives women bring to angel investing; and also suggests actions and initiatives to inform and attract more qualified women to join angel groups, the most prominent trend in angel investing.
Women may find an opportunity in angel investing that is different for men: the chance to serve on corporate boards of directors. In addition, some women are attracted to angel investing as a means of supporting the growth and development of women-owned businesses.
Women angels also note a desire to serve as mentors and they see angel investing as a focused opportunity to leverage their experience, whether they have cashed-out, retired or are still engaged in business.
Although the attraction and motivation for participation in angel groups are very similar for men and women, the process and experience of joining an angel organization appears to be different. Some of the interesting differences include:
- Women often come from different social networks than do men. This turns out to be both a challenge (they´re not in the loops that most commonly lead into angel investing, so they´ve had to show initiative to break in) and an opportunity (they can locate other women candidates more easily).
- Women find ways to enter angel groups on their own, as the women interviewed for the report were not invited to join angel groups. They did not wait to be invited and instead invited themselves to angel groups or started their own angel organizations.
- Recruiting strategies for women have similarities to those for men, but the messages for participation can be different and often more information is needed to secure their participation.
- Women who found and organized angel groups receive significant support from men angels.