Women build and leverage the ecosystem
While venture capital’s track record with women makes you want scream with frustration, the new angel numbers will make you want to jump for joy. For nearly all metrics, the numbers hit record heights in 2014, according to the Center for Venture Research, which researches angel investments. In 2014:
- 26% of all angels were women, increasing by an impressive 43% from the previous year.
- 36% of all companies seeking funding were women, increasing by a whopping 83% from the previous year.
- 28% of all companies receiving funding were women-run, a substantial 44% increase.
- 15% of all women-run companies succeeded in raising capital vs 22% for their male counterparts. “Typically, when there is a surge in the number of entrepreneurs seeking angel funding, the overall yield [success rate] goes down,” said Jeffrey E. Sohl, director of Center for Venture Research. The 15% success rate is within the historic norms for entrepreneurs raising capital from angels.
The numbers didn’t surprise Angel Lee, founder of 37 Angels, a community of women investors that invests in early stage companies (male and female-led). 37 Angels sources high potential deals and coordinates due diligence for angels. It also trains angels. For 15 years, the ecosystem for women-run companies in need of equity financing to scale has been building itself out.
Early on, Springboard Enterprises and Astia provided leadership training and access to capital. Super angel groups with venture funds, like Golden Seeds and Belle Capital, which invest solely in women-run companies, began forming. Other angel groups and venture funds also started up. These didn’t necessarily focus on investing in women-run companies but, because they are led by women, a high percentage of companies in which they invest are women-run. These include Boldcap Ventures, Illuminate Ventures and Broadway Angels. Formal angel training programs for women were begun by organizations like Pipeline Fellowship and 37 Angels. In addition, research documenting the high performance of women-run companies was published.
The impact of the ecosystem can be seen even better by looking at 10 year trends:
- The number of male angels has grown 13%, but the number of female angels has grown an impressive 318%
- The number of male entrepreneurs seeking funding grew by only 25%, and the number of female entrepreneurs seeking funding has exploded by 635%.
- The number of angels backing all-male teams has grown 22%, and the number of women-owned, angel-backed companies has jumped a whopping 234%.
Numbers are consistent with the upward trend in femal founders that Crunchbase found. It reports on startup funding activiity.
The importance of angels
Angels play an important role in launching the future major companies of the world, said Sonja Hoel Perkins, founder of Broadway Angels. Every major technology company was started with the help of angels, she continued. It’s not just money angels provide, it’s introductions to major customers, key employees, vendors and additional funding. They also mentor and provide strategic advice.
Angels are accredited investors, defined as those who have a net worth that is greater than $1 million (excluding a primary residence) or have earned more than $200,000 per year ($300,000 for couples) for the past two years with the expectation that the income will continue in the current year. Only a small percentage -- less than 3% -- of the accredited investors who qualify to become angel investors actually do so.
Approximately 316,600 angels invested $24.1 billion in 73,400 companies in United States in 2014, according to the Center for Venture Research. This is about half the amount of money venture capitalists invest, which was $48 billion, according to the MoneyTree Report. Angels are far more likely to invest in seed and start-up companies than VCs.
Women angels fly high
Hoel Perkins along with Jennifer Scott Fonstad started Broadway Angels to show the world that women make great investors. Only 7% of angel-funded companies get venture funding, a whopping 70% of Broadway Angel companies do, said Hoel Perkins.
Marketplace trends bode well for an increasing number of women angel investors
Women are the world’s fastest-growing segment of wealth creators and controllers. They control 39% of investable assets in the U.S., according to Harness the Power of the Purse: Winning Women Investors, by Andrea Turner Moffitt. “Women want to use their financial muscle to advance women,” she said.
Anecdotal evidence from focus groups and interviews that Turner Moffitt conducted suggests a deepening interest to invest in women entrepreneurs due to the personal connection that is lacking in large cap equity vehicles. Angel investing is a way to pay it forward -- not only using personal wealth but using your expertise to influence the trajectory of women-run companies.
Recognizing the trends in women’s wealth, angel groups are increasingly looking to attract women by offering training, said Susan Preston of the Angel Resource Institute (ARI) and Seattle Angel Fund. Preston is spearheading a new initiative called Women First Enterprises. It is a project of the Angel Resource Institute focused on educating and training women entrepreneurs and angel investors in the United States and globally. Learn-By-Doing Angel Funds is an initiative of Portfolia, a crowdfunding platform. It allows novice women investors to train alongside highly experienced angels to build a diversified portfolio of investments via Portfolia.
Become a risk-astute angel investor
if you are a wealthy woman who can afford to risk losing your investment, angel investing may be right for you. Angel investing is not for the risk-averse. It is for the risk astute. To determine if angel investing is for you, Preston suggests you ask yourself a series of questions.
Just getting started in angel investing? Crowdfunding platforms, such as AngelList, CircleUp, Crowdfunder and Portfolia offer an easy entry point. Many curate and vet deals. You can invest alongside more experienced investors. Investment minimums are frequently lower than they would be if you invested offline. Read more in Stand Out In the Crowd: How Women (and Men) Benefit From Equity Crowdfunding.
Female angels are showing the impact that they have on moving the dial for women starting companies. To the venture capital community, I’ll simply say choose possibility as Sukhinder Singh Cassidy, founder and chairman, of Joyous wrote in re/code, anything is possible.
This is the first article of a three part discussion on the impact women angels have on funding the growth of women-led companies. For more, read:
- Angels Ignite Blazing Growth for Women Entrepreneurs, More Fuel Needed
- Women Entrepreneurs Get Their Game On With Angel Investors
Photo Credit: Michel Filion
