A recent survey by Deloitte and Women’s Business Council showed that the percentage of women who started their own companies dropped in 2014, even though in that same year the highest number of new firm registrations was recorded. The reasons behind this are: female entrepreneurs do not have adequate access to networks and mentors; their risk appetite is low; and they do not have self-confidence.
The most important reason, however, is the discernible shortage of female investors. Even though there are several funding methods, angel investments remain largely influenced by men. According to a research by Startup DNA of 220 startups in UK chances of male entrepreneurs securing angel investment are 59%.
The landscape is changing slowly, but surely, with the percentage of women investors is now seeing a slight improvement. In the UK, for example, the number of female angel investors has increased despite the gap still being relatively wide.
This unequal representation has frustrated some angel groups and individuals who are now trying to make a change. After noticing a shortage of female angels in 2006, Anna Sofat founded Addidi, an angel investment and wealth management company especially for women. Sofat says, “The key messages I got from my clients were: yes they’d be interested in investing, but they didn’t want to risk too much of their money and didn’t want to spend too much time. Some had tried investing but didn’t enjoy it as the networks were typically white 50-something males and they didn’t have much in common with them.”
She notes that during that time, the normal way for one to become an effective investor was to join a network, commit not less than £100,000, attend several quick meetings and make prompt decisions. This did not work for women because most of them are detail-oriented. Women also make a point of asking questions and considering several options before making a final decision. Therefore, Sofat developed a model that allowed women to pool resources by contributing small amounts of money.
The situation is similar in Scotland where the percentage of female angel investors is very low, even though women hold almost half of total wealth. This prompted Jackie Waring to establish Investing Women, an angel group aimed at bringing female entrepreneurs and angel investors together. Waring said that she got her inspiration from the U.S. where the number of female angel investors has been constantly increasing. She also noted that many female entrepreneurs get encouraged to seek funding when they see female investors in the industry.
Julie Hanna, investor, entrepreneur and global entrepreneurship ambassador of Barack Obama, says, “It brings a different sensibility in terms of really diversifying the mix. Investing is largely about following patterns of success and when you are bringing more women into the mix it diversifies the patterns of success and makes for smarter investing, because you now have more patterns and more diversity of thought and experience brought to bear.”
Dale Murray, an entrepreneur, angel investor and founder of Omega Logic, a mobile top-up company, says that investors look for similar attributes in a business. This includes great products, strong market propositions, good margins and strong leadership. She says that successful female entrepreneurs demonstrate how unique their business is and how likely it is going to disrupt the market.
For those looking for investment, Murray says, “Focus on producing really clear, cogent business plans that clearly articulate the proposition. If they present a really good business I think most investors looking at it would want to invest – why wouldn’t they? Don’t get sidelined or put off by the idea that your gender that might mean you won’t get funding. I never once thought about that; I just totally focused on my business and kept pitching it. Eventually you get the right group of investors who understand what you are trying to do and are prepared to back you.”