Geri Stengel, forbeswomen
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 being 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 and based her remarks on research her magazine undertook.
Angel-back women-led companies 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. The media could play a role in encouraging more women to become high-growth entrepreneurs by highlighting them more, she continued.
It’s should be no surprise that angels are increasingly investing in women-led companies. These companies outperform other companies according to research conducted by Dow Jones VentureSource, Illuminate Ventures, Kauffman Foundation and the SBA Office of Advocacy.
Women angel investors not just put cracks in the glass ceiling they help women fly right through it
Starting high-growth companies frequently requires outside funding in order to scale. Getting a loan is not usually part of the mix for these companies. Banks don’t take on the kind of risk that scaling a start-up business involves. Loans become more of an option as a business grows and has the cash flow to cover monthly debt payments. Equity investors, such as angels and venture capitalists, do take on this kind of risk.
Angels are wealthy individuals who invest their own money in start-up companies in exchange for owning a piece of the business. There are exceptions but, for the most part, angels invest in the seed, start-up, and early stage of a business; venture capitalists invest in the later stages.
The angel investor market is continuing to recover from the financial crisis. Total investments in 2013 were $24.8 billion, an increase of 8.3% over 2012, but below the market’s high of $25.6 billion set in 2006. The steady increase 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.
Women angel investors may do more than crack the glass ceiling that prevents women from getting the capital they need. Women angels may 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. As those companies grow larger, women will get the experience needed to sit on larger company boards.
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. Preston, Robb, and Sohl are not concerned by the slight decline in the number of women angels from 2012 to 2013. All agreed that it is a natural shake out after the huge jump from 2011 to 2012. 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 women 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. It expanded 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.
Is Investing In Women Entrepreneurs For You? 9 Questions To Ask If You Want To Find Out is an article based on a training that Preston did for Pipeline.
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.
It’s not just hurting the bottom line for men, it’s stunting the growth of the country. “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.
Do you aspire to be an entrepreneur or to help an entrepreneur? The opportunities are growing for those who do. What business will you create or fund?