Investors tend to invest in people who remind them of themselves. The vast majority of individual business investors, known as ‘business angels,’ are men, so maybe it shouldn’t be surprising that the number of female entrepreneurs who get this kind of funding is also tiny. Fortunately, there have been a number of initiatives in recent years to promote more female investors and there are signs that the number of women business angels is beginning to increase. This article outlines where you can find female business angels and what’s involved in taking up angel investment.
TV Dragon’s Den investor Deborah Meaden is the best known UK female business angel. She also exemplifies many of the differences research finds female angels are likely to demonstrate. Women business angels are much more likely to want to invest in businesses that are socially beneficial. Deborah Meaden is no exception, well known in the ‘Den’ for seeking out ethical and green investments. These include reestore, the eco furniture design company, which turns household and industrial waste products into beautiful and functional furniture. Meaden accepts that her Dragon’s Den persona is a caricature: “nobody is like me on TV – surely only Cruella de Ville or the wicked witch on snow white. It’s me, but it’s me in that environment.” In reality, “people can call me what they like, fat, ugly, sour. But tell me I’m not fair, tell me I’m not ethical, those are the things that bother me.” Female investors also tend to invest more time in mentoring their investees and that’s something that female-owned businesses particularly appreciate.
Who are Business Angel investors
Angel investors are generally well-off people who provide small investments for start-up or growing businesses. In return, they usually receive equity – a percentage of the ownership of the business. There are generous tax breaks to encourage business growth with this kind of investment, through the Government’s Enterprise Investment Scheme and the Seed Enterprise Investment Scheme. A study by NESTA in 2009 found that the average investment was £42,000 and the average equity stake was 8%. There’s no ‘set amount’ for angel investment which can be as small as a £5,000 and go up to several £million. Angel investors will be looking for a good return on their investment and they are generally looking for an exit, or sale of their shares, within 5 years.
Most business angel relationships are sourced by the business seeking investment through their own networks. There are also several Business Angel Networks that help to match-make businesses with potential investors. Those networks also enable angel investors to share research efforts and pool capital.
Female Business Angels
In 2009 the percentage of female business angels was estimated at just 4% of the total number. There seems to be some symmetry between the supply of female investors and the low take-up of investment by women-owned businesses. A number of initiatives have sprung up to deal with this issue. If you’re a woman looking for investment (or you want to become an investor) they may be a good place to start:
Incito Ventures is an investment club for affluent women who want to invest in female-led start-ups. Incito provides investment and mentoring. It also provides training and development to support women to learn more about angel investors or to become investors.
Addidi Business Angels is a women-only angel investment club, which brings together 20-30 female investors, who each commit to investing £20,000. The club pool investments in small growth companies. Addidi recently invested in Karen Hastings business ‘Cupcake’, which runs clubs and cafes for new mums and their families in London.
Investing Women is a new community of women angel investors; women entrepreneurs seeking growth and those who want to help both, launched in 2013.
Other female-focused investment initiatives
While not strictly defined as business angels, other female-focused investment initiatives include:
Astia aims to provide access to the networks and expertise that women high-growth entrepreneurs need to succeed. It supports eligible businesses at any stage of development. They need to be able to demonstrate high-growth potential and have at least one woman in a leadership role. The Astia network links supported businesses to growth opportunities including investment.
Aspire Fund This £12.5M UK-based VC fund, supported by government funding and managed by Capital For Enterprise Ltd, invests in businesses led by women.
Ogunte Make a Wave Pre-incubator for aspiring women social entrepreneurs. A learning and co-mentoring programme including sessions with investors and funders, entrepreneurs and mentors.
Despite the parallels between low levels of female investors and investees, research elsewhere suggests that women aren’t less likely to win investment from mainstream business angel groups. They are less likely to ask. So if you think that business angel investment may be right for your business, don’t hold back. The female-focused funds may well provide the approach and type of support that best suits you, but if they can’t help don’t hesitate to take your pitch to the mainstream. The UK Business Angels Association represents 100 investment networks across the UK.
Photo: CC Felipe Neves via Flickr