By Alicia Robb
I never expected that writing a book would turn me into a venture capitalist. If you would have asked me about the likelihood of becoming a VC six months ago, I would probably have replied, “not very.” But I officially became a VC on August 14, 2015, on the heels of finishing my second book on financing strategies for women-owned firms with high-growth potential.
I am many things in the entrepreneurial world – from being a founder myself to being a mentor to other startups and an angel investor, as well as working on entrepreneurship-related research and policy issues and authoring papers, articles and one previous book on entrepreneurial finance and women’s entrepreneurship. But as my co-author Susan Coleman and I wrapped up this most recent book, coming out
Driving the Next Wave
In researching the gender gap on the investing side for our book, we interviewed a number of angel investors, venture capitalists and entrepreneurs. What the research told us is that there are many reasons why you will find a shortage of women in entrepreneurial finance, especially among angel investors:
- Many women aren’t aware of opportunities for angel investing
- They aren’t asked to invest
- They don’t feel prepared to make that first investment
- They are risk averse and shy away from making large investments
- They don’t know other angel investors and aren’t part of investor networks
- They don’t see deal flow and aren’t exposed to investment opportunities
I decided to do my part in driving more diversity in angel investing by first targeting the gender gap. So I talked with someone who’s already doing this in the crowdfunding arena. Trish Costello is founder of Portfolia, an equity crowdfunding platform that focuses on building a community of women-led companies and investors. Together we recruited some of the most accomplished women in venture finance across the country to help us create a fund and angel investor training program called The Rising Tide US Fund to increase women’s participation. The training program is an innovative way to learn-by-doing as an angel investor.
Simplifying the Process
SEC rules get complicated if you go beyond 99 investors in any fund, so we created a million-dollar micro fund by asking 99 women to invest $10,000 each. Out of this fund, we will make about six to eight early-stage investments and create a diversified portfolio of investments in terms of both sector and geography.
I made a lot of mistakes as a new angel investor. Mistakes that could have been avoided if I had been mentored by more experienced angels rather than going off and doing it on my own. Luckily it hasn’t been a complete disaster, and I’m still really excited and engaged in angel investing. But now I want to do it more intelligently, so I am going to be one of the 99 investors in this new fund. I reached out to successful, experienced women investors – AKA “the NINE” – to become part of the 99 investor fund as “lead investors” who will mentor 90 new and emerging angels. The nine will source investment opportunities, lead the due diligence and make the investment decisions.
Filling a Gaping Hole
In the world of high-growth entrepreneurship and equity investing, women are the exception, not the rule. A 2014 Babson College study revealed that the proportion of women partners in U.S. venture-capital firms declined from 10 percent in 1999 to 6 percent in 2014. A blog post last year from venture capitalist Stephen Greathouse is indicative of the status quo: Equity financing is currently a man’s world. When he wrote about becoming a venture capitalist, he used this analogy:
An aspiring venture investor has about the same numerical chance of becoming a professional baseball player as they do becoming a VC professional.
While I have no desire to become a professional baseball player (although I was a competitive cyclist and triathlete in my younger days, both very male dominated sports), my interest in venture financing has been growing over the last decade while doing research on the pitfalls and perils of entrepreneurial finance. As an entrepreneur, I bootstrapped my own company to get to more than a million dollars of annual revenues and operations in nine countries. That Babson study referenced earlier found that companies with a woman CEO received only 3 percent of the total venture capital dollars, or $1.5 billion out of the total of $50.8 billion invested during 2011-2013. We clearly are nowhere near parity.
Women have made more progress in the area of angel financing. In 2014, women angels represented 26 percent of the angel market, a slight increase from 2013 (19 percent). Women-owned ventures accounted for 36 percent of the entrepreneurs who were seeking angel capital, and 15 percent of these women entrepreneurs received angel investment in 2014. So while these numbers are better than those of venture capital, we clearly need to make a lot of progress to reach parity.
Starting Something Big
Trish and I started speaking to potential female investors and were astounded at the response of people everywhere we went. We clearly hit on something. We compiled a list of more than 100 women who said they were interested in participating in this first fund. Based on early interest, we expect the fund to be oversubscribed and will begin making a list of investors who didn’t make it in to this fund and roll them over to the next one. We are just getting started.
We are part of a global movement of women who are investing in the companies, teams and products we want in the marketplace. We welcome you to be a part of it.
