The case for women to invest in early-stage businesses

The case for women to invest in early-stage businesses

8th June 2017 by Simon Hiscox

This guest post was written by Sarah Turner, founder of Angel Academe an award-winning angel network started to encourage more women to invest in ambitious tech startups. They offer education and mentoring to their new angels, allowing them to invest side-by-side and learn from experienced investors.

If you’re a woman reading this, you probably already have a strong interest in equity investing. Maybe you’ve made an investment. Which is great. You’re bucking the trend.

Women on the whole have an aversion to investing. One survey found that on the top ten DIY investment platforms, the ratio of men to women is 68 to 32. And when we do invest we tend to be more cautious. Investment platform Nutmeg analysed its data and found that women were less likely to go for the higher risk investments that give the greatest returns. Only 33% of women would go for higher risk investments compared to 48% of men. This has an effect on how much we earn from our investments. Typically, women make £2,422 a year from their investments, while men make £3,794.

This reluctance to invest has been called “reckless caution personified”.

However, since you have, or are likely to, invest through an equity crowdfunding campaign, you have somewhat of an appetite for risk and you know that investing takes a lot of patience. You have to be in it for the long game, comfortable in the knowledge that you might not get your money back for a good few years, if at all. But the tax breaks and investing in a portfolio of these investments helps minimise the downside risk and maximise the upside.

There’s another form of investing which also locks up your money for the long-term but allows you to have a greater involvement and impact on the businesses that you invest in. Angel investing is not too dissimilar from what is depicted on BBC’s Dragon’s Den; in exchange for advice and funding, ambitious entrepreneurs sell a stake in their business. But because we aren’t chasing TV ratings we do it in a way that’s less like a game show and more collaborative and rigorous.

I set up Angel Academe to bring more women into the angel market by creating an environment that is more appealing to women and reflects how we like to work. Women own 48% of the wealth in the UK, a figure is set to rise to 60% by 2025, but are just 14% of the angel investor population. This “reckless caution” isn’t just having a negative impact on women’s pension pots, but is having an adverse effect on the startup landscape by depriving early-stage businesses of the skills, experience and contacts women bring along with their cash.

Some women assume that you need to be a millionaire to be an angel investor, but the reality is far closer to earth: women who self-certify only need to have a net income of £100,000 or more per year or net assets of £250,000, not including your pension fund or your private residence, or have experience in private equity or business. Angel investments typically start at £5,000 or £10,000 – though you can invest this amount or less on Seedrs – not beyond reach for many women running their own businesses or in senior positions and now looking for something really interesting to do with a proportion of their investable assets.

Women have been found to underestimate their performance and abilities, so if you’re a woman thinking about investing and reading this, you probably have a lot more wisdom to impart to an entrepreneur than you think you do. And crucially, it tends to be the right kind of wisdom. A 2010 study found that the higher the number of women in a group, the more effectively that group is able to cooperate and is more effective at solving problems. Running a business and advising its founders involves a lot of problem-solving.

Angel Academe has found that women investors are very keen to invest in women-led businesses and recent research has shown that female entrepreneurs are more likely to achieve a successful exit if their investors include women. Greater visibility of successful female investors also creates positive feedback loops: they encourage other women to invest and a greater proportion of startup funding tends to go to women-led businesses. That, in turn, will create a better gender balance overall and encourage more women to start businesses and seek funding to accelerate growth.

In 2016 only 9% of the £3.58 billion invested in startups went to companies with at least one female founder. Just like with angel investing, only 15-20% of investors on crowdfunding platforms are women and fewer women are successfully raising funding these platforms – just 18% compared to 72% of businesses with all-male teams.

We are working with Seedrs to improve the number of women both in angel investing and crowdfunding but we need your help to get the word out to more women. Whether it be through a platform like Seedrs more active angel in a network like Angel Academe we need more women getting involved in equity investment.

Investing in startups involves risks, including loss of capital, illiquidity, lack of dividends and dilution, and it should be done only as part of a diversified portfolio. Tax treatment depends on individual circumstances and may be subject to change in future. This blog post has been approved as a financial promotion by Seedrs Limited.


Simon Hiscox

Marketing Director

Digital Agency Kent