Finance

We ALL need more women investors

By Kitty Knowles 15 January 2018
Leaders from Diversity VC, Angel Academe and Baby2Body explain why we need more women investors. Image: Getty/ DNY59
Leaders from Diversity VC, Angel Academe and Baby2Body explain why we need more women investors. Image: Getty/ DNY59
Summary

Three awesome women explain why.

‘One in five startups has a female founder’ is a stat that often gets touted around.

To be more accurate, it’s actually a fifth of startups that receive funding have a female founder. Which gets to the rub.

According to Atomico, 80% of founding teams that raised money in Europe were all-male.

The devastating lack of investment in women is often discussed as being due to the bias of male investors – which is still prevalent, and absolutely should be called out.

“All that’s happened is that one bunch of very rich white men have transferred their money to another bunch of very rich white men,” Baroness Martha Lane Fox famously said.

But we can’t rest the blame solely on these men’s’ shoulders.

Our argument today:

If more women went into investing, that would help too.

A lack of female investors

Today women own 48% of the wealth in the UK, but make up only 14% of angel investors.

“When women don’t invest at a similar rate to men, everyone misses out,” Sarah Turner, founder at Angel Academe (an angel network that specifically helps women start investing) tells The Memo.

“Women themselves miss out on the opportunities of angel investing; the whole entrepreneurial ecosystem misses out on their capital and smarts; and female entrepreneurs in particular miss out on their support.”

The fact that most VCs still look like old-school ‘boys clubs’ exacerbates this: Diversity VC last year revealed that women make up just 13% of decision-makers across Britain’s investment firms.

“With far fewer women investing than men, women-led businesses are at a distinct disadvantage,” adds Turner. “This is even more pronounced in the tech sector than in other areas such as fashion, beauty and retail where plenty of women have proved themselves.”

You only have to look at world-leading technology funds like Octopus Ventures, Balderton Capital, Index Ventures to see teams dotted with women, while entirely all-male partners make the crucial investment decisions.

Why aren’t women investing?

As head of Angel Academe, Turner has identified several barriers that are stopping women from becoming angel investors.

“The biggest is simply a lack of awareness,” she tells The Memo.  

“Women don’t tend to talk about angel investing with each other and financial advisors don’t talk about it with their female clients. Women are also less likely than men to network in entrepreneurial circles and have exposure to high risk/high reward environments.”

These male-dominated networks also propagate myths that can be off-putting, she adds: “that you have to be an entrepreneur yourself, or that you need to be filthy rich or have lots of time and a huge appetite for risk”.

If you’ve read Emily Chang’s Brotopia book (which is awash with stories of drug-fuelled sex VC parties) you’ll be aware that VC investing can also be an alienating world for women.

Investment firms with this ‘bro’ culture absolutely have a responsibility to become more inclusive, but fighting for better gender ratios in firms should empower women to create comfortable supportive cultures of their own.

A win-win-win

Before any troglodyte VCs excuse their less than 50:50 ratio as being better for business, this simply isn’t true.

It’s been shown that diverse teams make better business decisions – with one recent McKinsey study showed that teams performed 35% better when they are ethnically diverse and 15% better when they are gender diverse.

“Having a great diversity of thought in the group will enable better investment decisions, which is good for VCs returns to their investors,” Diversity VC co-founder Francesca Warner tells The Memo.

An investment team with wider shared experiences will also help firms “be alert” to hot female-centric opportunities that might otherwise be missed.

One female founder Ridhi Tariyal, whose company collects period blood for medical and fertility screening, faced exactly this problem when seeking funding.

“Someone told us that the product would only help women, and women are only half the population — so what was the point?” she told the New York Times.

“Other potential funders wanted to reimagine their technology as a product for men: Was there some way to re-engineer it so that it would measure testosterone? And one guy suggested they develop a machine that a man could use to covertly test the health of his sexual partners, because ‘women are liars’ who spread venereal diseases.”

More women entrepreneurs

We also know that women are more likely to invest in women, Rachel Finegold, COO at female-founded motherhood business Baby2Body and former Investment Associate at the VC firm Firestartr, points out.

Data from the Harvard Business Review shows that VC firms with female investment partners are over two times more likely to invest in companies with a woman on the management team (34% to 13%) and are over three times more likely to invest in female CEOs (58% to 15%).

Even when male investors simply had a daughter, it made them more likely to invest in female entrepreneurs.

“Today, female entrepreneurs find it harder to raise venture capital funding than men,” Finegold tells The Memo. “But this data speaks for itself.”

“Female investors have a significant and tangible impact on female entrepreneurs receiving venture capital funding.”

Shaping the future

The positive impact of female investors doesn’t stop with the female-founded businesses they invest in.

“More female investors means more senior women in tech companies,” adds Finegold. “And seeing female investment will also encourage more women to start businesses in future.”

Even when female investors back male-led firms, they help shape a better future.

“The investor that puts the first institutional money into the company often sets the tone and culture for what is important later on as the company grows and expands,” says Diversity VC’s Warner.

“Having more women at this point and having an appreciation of the importance of diversity should have great longer term impact on the big tech companies of the future.”


How to get into investing

If you’re thinking about getting into investing, we’d recommend attending a Diversity VC event.

Co-founder Warner also personally recommends testing the water by making your first investments on a crowdfunding site (the likes of Seedrs, SyndicateRoom, or Crowdcube spring to mind).

“Even if the quantum is small (under £100) – it will give you a sense for picking companies and building a portfolio as you would in a VC fund, plus it will give you some real investing experience to talk about in any job interviews,” she adds.

If you’re a high-net-worth woman, Angel Academe is also great place to start being smart with your capital.

Networks like ours provide some initial screening of investment opportunities as well as a group of other investors with whom to pool capital and due diligence,” explains founder Turner.  

No excuses

Importantly, VC firms need to make “more of an effort to hire women,” argues Finegold.

And citing that ‘most job applicants are male’ is simply not good enough.

“The great thing about venture capital is that it draws on a diverse skill set that can be acquired through both operating and investing backgrounds,” she explains.

“Firms need to maintain meritocratic hiring practices, but using the supply problem as an excuse is not acceptable. Great women are out there – firms just need to find them.”

2018 is a new year, that could mean a new start.

Are you a great women? Help shape the investing world into one that’s better for everyone.