Where women fear to tread
The number of female millionaires is rising fast. So where are all the women business angels? Growing Business takes a closer look
British women are wealthier now than they’ve ever been. They account for nearly half of all UK millionaires and, by 2025, this figure is expected to reach 60%. So why is it then that a recent report from NESTA put the proportion of female angel investors at a meagre 7%? That’s a generous figure too. Some reports argue the real number is closer to 3-5%. The same can be said for the venture capital scene, where female participation stands at a mere one in 10 investors, according to a study by The Diana Project, a research programme set up to examine what influences high growth women-led companies.
A quick glance across the pond and the story isn’t much more comforting. Entrepreneurial think-tank The Kauffman Foundation noted in its 2006 study that “no more than 8%” of US business angels were women. The report concluded that the total number of female angels was far smaller than women’s collective wealth, education and experience suggested was possible. So the question begs asking: where’s the appetite for investment among female wealth holders?
Lack of awareness of the potential returns, and scant promotion of the successes of active female angels, could partly account for the dearth. Sally Goodsell, chief executive of Finance South East, says many wealthy women in the UK don’t even consider the possibility of angel investing. “Numbers aren’t really rising at present. And in some ways, programmes such as Dragons’ Den are not doing the angel market any favours as it’s seen as very aggressive and macho. This could be putting women off.” Goodsell also argues there’s a widespread misconception that angel investing is the preserve of the super rich, when in fact, somewhere in the region of £20,000 a year makes for a sufficient starting point. Rosemary Forsyth, who founded executive search firm The Forsyth Group, is an active angel investor. She recently secured a 40 times return on the investment she made 10 years ago in online fashion site Net-a-Porter, which was sold in a deal worth £350m earlier this year. “I’ve spoken to a number of angel funds about why the percentage of female participants is so low, and perhaps it’s because a lot of them have a benchmark of £200,000-plus for a single business opportunity, which doesn’t allow you to spread your risk,” she suggests. So one explanation could be that women are simply more risk averse, and this theory is certainly supported by research from the Hunter Centre for Entrepreneurship, which found that half of female angels will only invest in an opportunity alongside others, compared to the 79% of men happy to invest on their own.
The issue of female entrepreneurship rates also rears its head when you talk to those involved in angel investing. While the percentage of women starting new companies is fast approaching level ground with their male counterparts, the number of women-led exits isn’t. And with exits come cashed-out entrepreneurs looking to invest. “It’s partly economic, partly cultural,” says Goodsell. “We’ve seen very few women cashing out their businesses, and women who have inherited their wealth aren’t as interested in becoming business angels.” Rowena Ironside, who ran several multi-million pound ventures in the IT and hosting industry before becoming an angel, agrees. “Having the confidence to become an investor is typically linked with entrepreneurial experience. There aren’t many people with no start-up experience who become angels.” Cashed-out entrepreneurs also make for more successful angels, according to the NESTA report, especially when it comes to early-stage investments. Sherry Coutu is one of the most prominent female business angels in Europe. With investments in more than 35 companies, her portfolio includes DVD rental service Lovefilm and home energy management service AlertMe. Her issue is with the lack of angel investors in general – gender aside. “There aren’t enough angels at all, so if we could make more women realise how great angel investing is, that can only be of benefit,” she argues. And Coutu believes women’s tendency to be more risk averse is actually what makes them excellent investors. “Women are good at details, and you need that to be a successful angel.” Ironside is also quick to note the difference in the female approach to investing. “Women tend to ask different types of questions at investment meetings simply because our minds work a bit differently. When you have a diverse group of investors it changes the whole dynamic of a due diligence meeting and uncovers different things.” And as Goodsell points out: “Any market that has such an imbalance will not operate as efficiently as it should do.”
The idea that there are some business propositions that men simply ‘don’t get’, and therefore won’t invest in, is a recurring theme for discussions surrounding female angels. “A good business opportunity is a good business opportunity, but there are some areas or sectors where women simply have more insight,” says Forsyth. “If women are the main purchasers of a type of product or service then they’ll naturally make for better advisers.” Sharon Vosmek, the chief executive of Astia, a US-based organisation which promotes the involvement of women in high-growth ventures, reiterates the point. “It’s safe to assume the types of businesses women fund are often different. They tend to have more of a social or consumer face to them. It’s not about being better or worse, it’s about bringing a different market sensibility to the table.” Coutu says that while she does not consciously invest with her female hat on (most of her investments are in the heavily male-dominated tech sector), there are certain business opportunities she understands more than her male counterparts. For example, a recent addition to her portfolio, Cambridge University spin-out CTC, has developed a fertility product which measures women’s temperature to accurately assess the optimum time to conceive. “That’s a product a lot of men don’t get, but I love being involved, and it’s so easy to help the founders because what they’re doing is so right.” While the levels of female angel investing remain so low, that’s a significant pot of money not going towards innovation and start-ups, according to Vosmek. “We need to target those that aren’t participating, and at the moment that would certainly be women,” she says. But as well as the obvious advantages of more female angels for start-ups and entrepreneurs, there’s also the huge benefit to the as yet untapped pool of women investors themselves. “If you just look at the economic rationale, if you’re a man or woman and there’s a way to invest your money and see a great return, then you can only view that as a good opportunity,” argues Coutu. “For me, being an angel investor was the perfect thing to do after selling my second company. I’d just had my third child and angel investing gave me complete freedom over what I do and when I do it. Why wouldn’t women want to do something that offers beautiful flexibility, phenomenal intellectual stimulation and economic reward?”
The benefits of encouraging more women angels, both for entrepreneurs and the potential angels themselves, are evident. But what can be done to give the female investment scene a jump-start? The general consensus is that a combination of improved education, more widespread promotion of the potential rewards and better tax incentives would go a long way. “People like me need to broadcast more when we have successful exits,” says Forsyth. “Look at women like Sherry Coutu, who have had phenomenal success. I know people are often reluctant to boast, but once the deal is public knowledge there’s no reason not to tell others of the potential high returns available from investing.” Coutu, who makes three to four investments per year, says there are plenty of successful women angels who could fly the flag and encourage others, but broadcasting success is “not a woman thing to do”. Instead, she suggests more research-based publicity – such as the NESTA report – which offers potential angels evidence of the possible returns available. Earlier this year, a government-backed campaign run in partnership with female wealth management firm Addidi, Finance South East and the British Business Angels Association was launched to do just that – encourage more female wealth holders to consider the possibility of investing, while also providing support groups and training for those interested in learning more. Vosmek believes this kind of initiative can see tangible results. “At Astia, we’ve run training sessions for women to pursue angel investing and I think the UK would see huge benefits from similar programmes. Companies don’t just need money, they need smart money, so investment should be pursued very systematically.” However, even more pressing than the training issue is a tax one, according to Vosmek, who cites the recent French policy which allows angels to deduct 25% of investments from their tax bills, provided the money goes into European research-intensive start-ups. “You can track angel investment and its rise to tax policy,” she argues. “Where there are tax schemes in place that provide favourable circumstances, you’ll see an increase.” Indeed, Coutu says many of the companies she meets often head off to France to top up their angel rounds, and the emergence of the Women Equity for Growth funds, run by European investment bank Bryan Garnier & Co, is a direct result of this tax policy. A 2009 study by the World Economic Forum concluded that a reduction in gender inequality would increase gross domestic product in Europe by 13%. So with angels providing much needed capital where VCs and banks fear to tread, the need for more female investors is an issue that needs attention – and soon.
The super angels
Coutu has investments in more than 35 companies, as well as stakes in two venture capital firms. She is a trustee at NESTA, serves on the boards of LinkedIn, Seedcamp, Zoopla, and Cambridge University’s finance board and counts DVD rental service Lovefilm among her investments.
Baumann is the founder and chief executive of Go Beyond, an early-stage investment firm based in Switzerland. She is president of EBAN, the European trade association for business angel networks, and serves on the board of CTI Start-up, a Swiss agency that promotes technology and innovation.
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Burbidge is co-founder of White Bear Yard, a tech start-up hub and collaborative workspace in east London. She is a non-executive director and adviser to several early-stage tech companies, and an angel investor in various projects in the UK, Europe, and the US. She also served as investment director at Ambient Sound Investments, the private investment fund of the Skype founding engineers.
Johnson is a serial entrepreneur and business angel who co-founded SES, one of the biggest satellite operators in the world, and helped to set up and finance numerous other high-tech companies. She is a founding member, and former president, of Sofia Business Angels, an international organisation which meets in France once a month.