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Female entrepreneurs enrich the ecosystem by becoming investors

Written by Josh Russell on Tuesday, 02 June 2015. Posted in Investment, Finance

Encouraging more women to get involved in investing is key if the UK is to really harness the potential of the ever-growing start-up community

Female entrepreneurs enrich the ecosystem by becoming investors

A common refrain in start-up circles is how important it is to increase the number of female entrepreneurs. But far less attention is paid to how there are still comparatively few female investors. Research released by the Centre for Entrepreneurs in January of this year revealed that 14.1% of angels are female compared to the 85.9% who are male. Whilst the proportion of women who are angel investing has nearly doubled since 2009, it is clear there is still a long way to go before we have any semblance of gender parity.

There is certainly a significant value in attracting more women into becoming investors. One of the benefits of increasing the proportion of female investors is it can make it easier for female entrepreneurs to secure finance. “The start-up world is so high-pressure and fast-paced, you have to be extremely aggressive,” says Hermione Way, the journalist, serial entrepreneur and investor. “If you’re a woman that’s not made of that sort of stuff, it can be very intimidating.” Increased gender parity amongst the investment community could make going head-to-head with a panel of investors less daunting for women who might feel their gender could get in the way.

But female investors bring other benefits to female-led start-ups aside from just a more equitable pitching environment. “We’re seeing female investors getting actively involved as mentors and in non-exec director roles,” says Luke Lang, co-founder and chief marketing officer at Crowdcube, the equity crowdfunding platform. For female-led start-ups, having access to the experience of investors who might have better insight into the issues they face can add massive value to their business. “The more diverse your investor community, the greater the breadth of experience, skills and knowledge you’ll be able to bring to bear on the business,” explains Lang.

So how can the number of female investors in the UK be boosted? Identifying how we can attract a greater proportion of women into investing isn’t straightforward but there are certainly practical steps we can take. “If we can change the business environment to be more women-friendly, then we can attract more female investors,” says Way. Though this may be easier said than done.

Whilst there are VCs that have a higher proportion of female investors than might be expected, they are still on average falling short. Way references a recent statement from Dave McClure, the high-profile Silicon Valley entrepreneur and angel, where he described women as an ‘undervalued asset’. “VC firms that are run by males need to hire more female partners,” she says. “That will be a big first step, so that the face that is going out into the community is female as well as male.”

But it doesn’t all fall to the VCs. There is a sense that as female entrepreneurs continue to gain more prominence within the UK start-up ecosystem that this will naturally begin to balance the investment landscape. “The number of female entrepreneurs is increasing at a faster pace than ever before,” says Rupa Ganatra, former investment banker, serial angel investor and co-founder of Yes-Sir.com, the e-commerce platform for male grooming products. Inevitably, as the number of female entrepreneurs achieving high-profile successes and major exits increases, reciprocally the number of women ploughing their capital into other start-ups will rise. “As women on the entrepreneur’s side increase, you’ll start to see more female investors,” she says.

There is another factor helping to boost gender parity in investment circles: crowdfunding. “It has broken down the barriers and put everyone on the same level,” Lang says. In 2013, Crowdcube revealed that women represent 25% of investors; a significant boost compared to the 14.1% of angels that are female. Lang feels that part of the reason equity crowdfunding has been so successful in drawing female investors is it allows them to sidestep the perceived boys’ club of investment circles. “They can have parity with a male counterpart without having to go into the male-dominated environment of an angel-investor network,” he says.

But whilst getting a chance to dip their toe in can certainly help female investors build confidence, Way believes that given the way the old business norms are being disrupted there’s never been a better time to jump in with both feet. “What we’re going through now is more significant than the industrial revolution and the rules of business are really changing,” she says. The start-up sector is in constant flux and this means that the opportunity for aspiring female investors to define their own path has never been stronger. “If there’s any women out there on the fence about becoming an investor, they should just go for it,” Way concludes.

 

Driving change

Hermione Way is no stranger to how tricky it can be to raise funds as a female entrepreneur. Her latest start-up Vibease, the smart vibrator company, netted a $500,000 seed round and is in the process of trying to secure $5m for its series A funding. Whilst plenty of male investors have leapt at the chance to back the start-up, this doesn’t mean there haven’t been times she’s had to fight to be taken seriously. “When I’m going to meetings, not only am I pitching a sex-related start-up but I’m also a woman, which puts some investors off,” says Way. “Unfortunately, men react well to men.”

There’s been a lot of discussion over the years about how hard it is for female entrepreneurs to access investment and Way decided it was time she addressed the issue. “I was like, ‘fuck it; enough talk, more doing’,” says Way. She shared a post with more than 31,000 Facebook followers that she and her husband were looking to invest $10,000 in investments of $500 to $1,000 in female-led start-ups. And the response has been huge. “The post went viral; it got shared over 140 times and I had over 100 women reach out to me,” she says.

Way is keen to emphasise that the start-ups she is investing in are far from just being throwaway ideas. “They all have minimum viable products, they all have customers,” she says. “These are women that take entrepreneurship very seriously.” Her first investment is Toot, an app created by entrepreneur Sophia Parsa that acts as a marketplace to connect tutors and students. “It’s a great idea and she’s a great co-founder,” Way says. 

About the Author

Josh Russell

Josh Russell

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.

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