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Kauffman Foundation Report Discusses Growing the Pool of Angel Funds by Involving More Women
NEW YORK, NY, April 27, 2006 - Despite increased financial power and wealth, high net worth women represent a largely untapped source of capital for start-up entrepreneurs, according to a new report released today by the Ewing Marion Kauffman Foundation.
The report, Women and Angel Investing: An Untapped Pool of Equity for Entrepreneurs, provides insights and recommendations from leading women angels on how to grow the pool of early stage equity by encouraging more women to be angels.
Of the estimated 225,000 active angels who invested $23.1 billion in nearly 50,000 entrepreneurial deals in 2005, no more than eight percent are female, as estimated by several reports.
The report notes that the total number of women angel investors is smaller than women's collective wealth, education, and experience suggests is possible and calls the shortage of women angels "as a missed opportunity for women, for the entrepreneurial community, and U.S. competitiveness as a whole." The report was released today at the Kauffman Foundation-sponsored North American Summit of the Angel Capital Education Foundation (ACEF).
"Angel capital, whether invested through organized angel groups or by wealthy individuals acting independently, is essential to entrepreneurial start-up activity in the United States," said Carl Schramm, President and CEO of the Kauffman Foundation. "Considering that women's financial power and wealth has grown in the past 20 years -approaching half of the nation's net worth - it appears women are under-represented in this type of investing and that we are missing an opportunity for new investments and perspectives. The gap between the potential and actual participation of women as angel investors raises important questions that need to be addressed."
The report - which summarizes the comments of twelve leading women angels during a day-long roundtable - addresses the factors that influence women to become angel investors as well as the dynamics that may inhibit women's participation. The report also suggests actions and initiatives to inform and attract more qualified women to join angel groups, the most prominent trend in angel investing.
The Kauffman Foundation and Angel Capital Education Foundation are seeing an increase in women's interest in forming angel groups. Currently there are six women angel groups operating in the United States today with clout and committed capital and there is interest in starting women's groups in as many as ten cities in North America. In addition, many existing women angels are aggressively recruiting women of wealth into angel groups that are not gender based. Still, the number of women involved is relatively small.
"There is frustration among the women we talked to that more sophisticated and successful business women aren't part of the early-stage investment food chain," said Maggie Kenefake, Manager of Growth Entrepreneurship at the Kauffman Foundation. "The good news is the number of women angels is likely to grow - and they are more likely to bet on other women."
While there are behavioral and cultural differences between men and women angels, they share common reasons for entering angel investing, including the desire:
- For an above average rate of return on investment
- To engage in the high-passion, high-energy world of entrepreneurship
- To mentor emerging companies
- For exciting "next stage" career opportunities
Women may find an opportunity in angel investing that is different for men: the chance to serve on corporate boards of directors. In addition, some women are attracted to angel investing as a means of supporting the growth and development of women-owned businesses.
"The women entrepreneurs we've recruited know we are committed to helping them build their businesses. We are rigorous in the process, are totally supportive of the entrepreneur, and respect what they've accomplished," said Stephanie Hanbury-Brown, a former Wall Street executive and director of Golden Seeds, LLC, an angel group that invests in early stage, women-led companies, as well as a member of New York Angels.
Women angels also note a desire to serve as mentors and they see angel investing as a focused opportunity to leverage their experience, whether they have cashed-out, retired or are still engaged in business.
Although the attraction and motivation for participation in angel groups are very similar for men and women, the process and experience of joining an angel organization appears to be different. Some of the interesting differences include:
- Women often come from different social networks than do men. This turns out to be both a challenge (they're not in the loops that most commonly lead into angel investing, so they've had to show initiative to break in) and an opportunity (they can locate other women candidates more easily).
- Women find ways to enter angel groups on their own, as the women interviewed for the report were not invited to join angel groups. They did not wait to be invited and instead invited themselves to angel groups or started their own angel organizations.
- Recruiting strategies for women have similarities to those for men, but the messages for participation can be different and often more information is needed to secure their participation.
- Women who found and organized angel groups receive significant support from men angels.
The paper notes that while there are factors that inhibit the growth of women as angels - such as different social networks, lack of awareness, and fewer backgrounds as cashed out entrepreneurs - the women who are leading the angel group movement bring many advantages to the field of angel investing:
- The women-friendly groups tend to be more collaborative. They create a supportive environment that encourages questions from newcomers and also emphasizes respect for entrepreneurs.
- Women angels may consider a broader range of investment opportunities, and bring new perspectives to the evaluation process.
- They express a strong commitment to supporting women (and sometimes minority) entrepreneurs
- They emphasize angel education.
The women in the roundtable made a number of recommendations to accelerate the growth in the number of women who are angels and who participate in angel investing groups. Recommendations included building strong national and regional networks of women angels; increasing the visibility of women angel investors through well-known role models; and conducting research on women angels and entrepreneurs. They suggested using roundtables, judging business plan competitions, and speaking at community business functions as ways to publicize women angels and the personal and financial reward of investing in entrepreneurial companies. The angels also recommended expanding and sharing educational programs to provide technical training to potential angels. This could help de-mystify angel investing for many potential participants.
The Angel Capital Education Foundation, a program of the Ewing Marion Kauffman Foundation, promotes education and research in the field of angel investing. ACEF holds conferences and meetings for angel group leaders, educational workshops and seminars for individual angel investors, builds data on angel investing, and supports research to advance the field. This work is designed to improve the quality and quantity of early-stage financing available for innovative entrepreneurs. More information is available at www.angelcapitaleducation.org.
The Ewing Marion Kauffman Foundation of Kansas City is a private, nonpartisan foundation that works with partners to advance entrepreneurship in America and improve the education of children and youth. The Kauffman Foundation was established in the mid-1960s by the late entrepreneur and philanthropist Ewing Marion Kauffman. Information about the Kauffman Foundation is available at www.kauffman.org.
