Calling the angel investment sector a male-dominated field is somewhat akin to saying that the ocean is wet -- it’s true enough factually, but the description doesn’t quite reveal the scope of the matter. In 2017, analysts for the UK Business Bank found that the vast majority of angel investors were men, with women accounting for just 14% of professionals in the sector. Believe it or not, this number constitutes a significant rise from a decade or so ago; in 2008, the percentage of female investors stood at 3%. For all that the global financial sector regards the UK as one of the most mature angel investment communities in the world, we nevertheless lag behind our international peers when it comes to offering gender-balanced opportunities in the field. Consider the US for example; in 2017, a full 30% of stateside angel investors were female.
The UK needs to encourage more women to pursue angel investment -- not only because it makes sense from a social perspective, but also because doing so will spur innovation and create opportunities for a more diverse subset of entrepreneurs. According to the Center for Venture Research, the rise in female angel investors has led to a corresponding uptick in the number of women-led companies. Researchers found that 24% of angel-backed companies were directed by women in 2017 -- a leap of over 75% from 2007, when the rate stood at 19%. Women investors certainly seem to place greater importance on gender than their male counterparts; another recent study from The American Angel found that 51% of female angels -- versus 6% of male -- considered a founder’s gender to be a crucial factor in investment deliberations.
The data is clear: female investors want to support female entrepreneurs -- or, as Loretta McCarthy recently put the matter in an article for Entrepreneur, “diversity among decision-makers opens minds to the possibility of investment in diverse entrepreneurs.”
The positive effects of having more female angels, however, do not start and end with greater entrepreneurial diversity. Female angels could also have a profound positive impact on their communities, given that women tend to place a higher value on a venture’s capacity for social change than their male colleagues do. According to data collected by the abovementioned American Angel project, 33% of female investors viewed a startup’s social mission as an “extensively used” criteria in their deliberations, compared to 16% of men. Given these tendencies, it seems fair to say that having more women in the investment sector could be a factor that brings new priorities and fresh ideas into a historically homogenous field.
The benefits of welcoming more women into the angel investing sector are clear -- and yet, the path to a more gender-balanced future is a long one. As I mentioned earlier, the number of female investors in the UK is painfully low at the moment, though it has increased over the past decade. Women interested in angel investing struggle to vault socially-imposed, gender-specific barriers to entry. Let’s consider a few here:
For women, risk-taking is seen as irresponsible.
Gender stereotypes can penalise women for deciding to make “risky” investments. As one participant recently commented in a UK Business Angels Association report on female angel investors, “Women can be seen as bad mothers when they make risky investments, instead of investing in real estate to offer a roof to their children, while men who are fathers choose to make risky investments.” Gendered stereotypes suggest that women should be more financially conservative than their male counterparts; rather than being viewed as bold, female investors are labelled as greedy for seeking financial gain.
Yet, these stereotypes and labels are not reflective of most female angels’ motivations. The UKBAA study found that women investors were driven primarily by their love for entrepreneurship, the satisfaction of being involved in building an innovative venture, and a desire to pursue an interesting idea. Making money is a motivation, yes -- but on a list, it falls far lower than the stereotype would suggest.
Women usually don’t receive advice on how to become angel investors.
Given that risky investments are generally -- if subconsciously -- seen as unsuitable for women, it makes sense that advisors tend to direct female clients away from the angel sector. Researchers for the UKBAA study noted that over 90% of female respondents received “no information or advice about angel investing or the tax breaks that mitigate risk” from their financial advisors. Instead, their advisors directed them towards “safer” options such as property, stocks, and shares -- and left women without the advice they needed to break into angel investing.
There are few female investors in the angel sector.
Women who are interested in angel investing tend to have less access to same-gender mentors and thus have less of a support network than their male colleagues might have. Female angels have to navigate the landscape alone -- and the journey can be intimidating. This lack of interpersonal support may be the reason that, as one 2015 UKBAA study points out, women tend to invest in networks rather than operate as individuals.
As matters stand, the angel investing sector is overwhelmingly male. Women can and should be angel investors -- but if they don’t have the information they need to step into the role, their potential will be wasted. More resources, mentorship opportunities, and advice should be made available to aspiring female investors. With time and work, we can achieve a more gender-balanced industry -- and reap the innovation benefits that such diversity naturally brings.