Research last month from the Women’s Business Council and Deloitte found the proportion of women starting their own firms fell in 2014, despite a record number of new company registrations. There are a range of reasons why – limited access to mentors and networks, lack of self-confidence and a ‘lower appetite for risk’ among some female entrepreneurs.
The lack of female investors out there may also play a part. There are numerous routes to funding but angel investment is still mainly driven by men. Considering we often hear that investors invest in those with characteristics they see in themselves, it’s not surprising to note there can be a pattern to the ‘type’ of businesses that receive funding. A study of 220 UK start-ups by Startup DNA found male entrepreneurs are 59% more likely to secure angel investment.
The situation is improving, though. Women now represent one in seven angel investors in the UK, double the rate in 2008, according to the UK Business Angels Association and the Centre for Entrepreneurs. But that’s still a big disparity. Rich lists might still be populated primarily by men, but the gap is closing. CEBR research back in 2005 suggested women now own 48% of Britain’s assets.
Some individuals and angel groups have grown frustrated with the unequal representation and are trying to change it. Anna Sofat (pictured) set up Addidi, a wealth management and angel investment firm for women, in 2006 after noticing the lack of female angels. ‘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,’ she says. ‘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 says the typical model at the time meant you joined a network and had to commit at least £100,000 to be an effective investor, attended quick meetings with a flurry of business pitches and then made a prompt decision. ‘Women don’t work like that,’ Sofat argues. ‘We want to get underneath things, ask questions, consider things and make considered decisions.’ So she devised a model that asked participants to chip in tens of thousands rather than hundreds of thousands by pooling resources. Sofat has overseen three angel groups of around 17 members each. ‘Since 2009 I think we’ve probably near single-handedly doubled the number of business women angels in the country,’ she says.
Investing Women founder and CEO Jackie Waring
It’s been a similar tale in Scotland – only 2% of angel investors are female despite 46% of wealth being held by women. Entrepreneur Jackie Waring set up Investing Women to bring together angel investors and female entrepreneurs. The angel group kicked off in the summer of last year, and its 20 members have helped raise £4.5m to fund growth in women-led companies. Waring’s looked to the US for inspiration, where she says ‘a real sea change’ is under way regarding the numbers of women involved in angel investment (one in four angel investors are women), while also seeing ‘much higher levels of female-led firms pitching for investment’.
‘It’s become apparent that there’s a strong connection between them,’ she says. Many female entrepreneurs simply feel encouraged by seeing women investors out there – making them more inclined to go for funding. ‘If we were to reach the same level as the USA we should be able to see at least another 300 or 400 women in Scotland who could be in this space,’ Waring says.
For Dale Murray (pictured, left), the decision to become an angel investor seemed simple. She had already been through the process as an entrepreneur with her mobile phone top-up firm Omega Logic and thought she could lend her experience to others. Ultimately, she feels good investors are all looking for the same attributes from a business prospect. Murray lists those ‘that have great products, good margins, defensible market propositions and are led by strong individuals with good track records’. She does though, think unconscious gender bias remains a problem.
Greater diversity among investors should continue to help combat this and Julie Hanna, entrepreneur, investor and Barack Obama’s ambassador for global entrepreneurship, says the growing cohort of women investors is helping to build momentum. ‘It brings a different sensibility in terms of really diversifying the mix,’ she says. ‘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.’
Murray reckons around half of the companies she has invested in have had a female co-founder. ‘Those women who demonstrably show that their business is striking in some way compared with the norm in their industry, those are the people who tend to get further along with their investment,’ she says. ‘Because that’s when you’re talking about the interesting stuff, about how to differentiate your product, and that’s typically when investors begin to recognise we’re talking about a business that could be quite disruptive.’
And her advice for those seeking investment? ‘Focus on producing really clear, cogent business plans that clearly articulate the proposition,’ Murray says. ‘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.’