Sunday, October 25, 2009

Women Don’t Believe in Angels

In my work with angel investors, I have noticed a surprising lack of women, on either side of the table. What is it about being an entrepreneur asking for or giving funding that seems to make it primarily a male domain? I hit this topic a few months ago, but still don’t see a clear answer.

An online article from the U.S. News & World Report, while touting the resurgence of women entrepreneurs, admitted that only 8.9 percent of proposals brought to the angel organizations they studied were pitched by women. As a result, more than 90 percent of angel dollars tend to go to men.

Yet this same article also asserts that “Nearly half of all privately held firms in 2004 were at least 50 percent owned by women.” A logical conclusion is that women tend to avoid the added risk of investor money. My friend Francine Hardaway says “Women aren't as risk tolerant and they hit singles rather than swing for the fences.”

Elsewhere I found confirmation that more than 95% of business angels are men. This would also suggest that women are not as comfortable with the process of deciding who gets their money.
So I looked to other studies for evidence why women are less likely to be angels:
  • Favor women-owned businesses. Women are more likely to participate and invest in women-owned businesses. But since there a few women-owned businesses asking for angel funding, their investment opportunities are fewer.

  • Investment criteria. Men are more likely than women to relax their investment criteria on the basis of their gut feeling/instinct. Women demand more evidence, which often isn’t there, so they don’t invest.

  • Network differences. In terms of deal flow, men give greater emphasis to personal connections, while women make greater use of professional contacts (lawyers, accountants). Male business angels team with other angels and close more deals.

  • Investment domains. Women are more likely to limit their investment activity to domains they dominate, like fashion and perfume. These areas are less frequently served by angels. They don’t seem to be as excited as men by technology and inventions.

  • Motivational differences. Women are more likely to be associated with and invest in socially beneficial products/services, like “green” and worthy causes, as well as the next generation of entrepreneurs. Not as many of these ask for venture investments.

  • Increased role with investee. Women spend more time with their investee businesses than male angels. Women are more likely to assist in strategy development, making contacts with suppliers and customers, and removing or recruiting members of the management team.
I am convinced that increasing the number of women business angels would have a positive effect on the flow of financing to women entrepreneurs. Moreover, if women business angels were more visible as a consequence of their greater numbers then this might encourage more women entrepreneurs to approach them for funding.

I don’t find any evidence of a glass ceiling in this corner of the small-business world. Women who own small businesses should have nothing to fear when it comes to angel funding. We would love a couple of women on our angel group board, but rarely see one even attend a meeting. There must be more to this picture. What is it?

Marty Zwilling



  1. Marty -

    I can't speak for all women angels, but here are a few points from one.

    My first 'angel' level investment was in 1986 and have continued to to make investments over the last 20+ years. In every case, the investment was in a company where I personally knew the leader, trusted their capabilities, and believed in their vision for what the company could grow to be. The investments were in the fields of semiconductor technology, software, educational systems, and biotech. Not a fashion or perfume company in the bunch. ;)

    I use my network of friends and business associates to find 'really cool deals' rather than sit in a room and get pitched to by people I have never met before. I may attend an angel or VC conference from time to time to keep a finger on the pulse of the area, but in the end, the people make the difference for me so places where I can meet and cultivate relationships with people who have great ideas is where this angel is more likely to be found.

    On another note, never underestimate the impact of Moms as angels, a number of great companies got their start because Mom kicked in the seed money or invested in early rounds.

  2. Interesting article Martin,

    I can think of a few additional reasons:

    1) Maybe women have too much money.
    2) Maybe women prefer to use male partner's money for investment purposes
    3) Maybe women are more astute with loans.

    Bottom line is facts speaks louder than assumptions.

  3. Hello Martin,
    How funny it is :) I just posted
    yesterday. Sorry, it's in French.

  4. @Patrick, no doubt that great minds think alike. :-)

  5. Pleeeeeease,
    translate your messages in french.
    We have lot of ideas and you know that our ideas are very good.
    The world is make with the diversity.
    Do you like the diversity ?

  6. @Anonymous, thanks for your positive feedback. I'm always looking for a connection to translate into French, but so far I haven't found one. I like diversity, I am energized by it. I have travelled to many countries and enjoyed learning the cultures, and will continue to do so.