By Jenny Tooth, CEO of the UK Business Angels Association
With an increasing focus on ensuring that women are succeeding as business leaders, having equal representation on boards and in their salaries, there remains an ongoing disparity in the proportion of women who are using their financial capacity and business expertise to invest in small businesses.
This was the basis of an important new research report released earlier this year, led by UK Business Angels Association on behalf of six leading European markets.
The report focused on understanding understand the challenges that are holding women back from angel investing, as well as finding out how we could reach the women who fit the profile, but don’t currently invest – and what more could be done to access this untapped pool of essential capital to support entrepreneurs in our economy.
Titled ‘The Barriers and Opportunities for Women Angel Investing in Europe’, the study is based on the views of 640 high net worth women across the UK, France, Italy, Spain and Belgium, of which 310 were already investing and 330 not yet investing.
83% of the women in the survey classified themselves as High Net Worth, and 17% as sophisticated, i.e. professionally experienced.
The report shows a concerning trend across Europe of financial advisers giving gender-skewed advice, women’s lack of confidence in themselves and a lack of senior female role models.
For example, only 14% of women investors have been informed by advisory sources about relevant tax breaks or funds enabling them to invest in small businesses, and 78% of women investors only found out about relevant investment opportunities because of their own professional groupings and networks.
Due to financial advisers’ view of women as more risk averse, the majority of women were instead directed to stocks and shares first – followed by bonds, pension funds, assets under management and property before being made aware about EIS and VCTs.
The UKBAA’s report also unveils the important propensity with which they invest in women entrepreneurs. Close to 20% of female angel investors have invested in 3 to 10 women founders, compared with only a few leading male angels investing in a significant number of women founders.
This finding is significant in that recent research carried out by Beauhurst showed only 2.9% of women founders go on to successfully access equity investment and that male-led start-ups are 86% more likely to secure equity investment than their female counterparts and the current level of women entrepreneurs, whilst the study showed that only 9% of total investment funding went to women.
Women entrepreneurs are less likely to go forward t pitch when they have to present to a room full of male investors and find the experience daunting and less likely to be a successful experience than when they are pitching their business to a diverse group of investors with a significant number of women present. Thus, we can see a strong co-relationship between increasing the number of female angel investors and the potential for increasing the number of women founders successfully attracting investment to build and grow their business.
Over half (54%) of the women investors in the study had previously founded, co-founded or run at least one company. The findings also showed that many women who had begun angel investing were operating portfolio careers, often having had a corporate background, but taking a decision to move out of this career path.
This had led them to meet and have contact with entrepreneurs and start to mentor and investing their businesses.
This reflected a key finding of the report that what held back many women from investing was that they lacked contact with entrepreneurs whilst being unaware of the opportunity to invest their spare capital.
Many women also assumed that they had to be uber-wealthy and invest significant amounts of cash into each business.
The findings showed that nearly 80% of women investors were putting in less than £20,000 per funding round. 47% of women invest between £5,000- £10,000 per company/funding round), while only 11% are putting in between £20,000 and £50,000.
This reflected the fact that women frequently invest as part of a syndicate and this enables them to build up a portfolio of investments making smaller investments, enabling them to spread their risks.
The research demonstrated the huge lack of awareness among women about investing, with a number of misconceptions about the process or understanding of how to mitigate the risks. There is also a severe lack of lead women angels, reporting successful outcomes and exits.
The research has been part-funded by the European Commission and is part of an ongoing programme across the 6 countries called Women Angels for Europe’s Entrepreneurs WA4E, coordinated by Business Angels Europe.
The report also looks at what steps European women themselves recommend to Government and the EC increase the number of female angel investors.
Actions recommended include: building a national and European campaign to raise awareness among women about the opportunity to angel invest, offering access to bespoke education and support, whilst also proposing the development of new co-investment funds to leverage women led investments.
UKBAA will be drawing on these findings and recommendations to actively engage in a programme of actions across the UK in the year ahead with a view to encouraging more women to take the leap into angel investing.