Angel Investment is big news. TV shows like Dragons’ Den have shone a light on investors who are keen to provide capital for start-ups for some time. They do so in exchange for ownership equity or convertible debt and in return can help provide anything from funding to support with networks and investments.
Bill Morrow, founder of Angels Den, an angel-led crowd funding platform, recently posited that there is gender imbalance when it comes to angel investment. And not in the way we’d imagine either. He suggested that women are 2.2 times more likely to receive funding from angel investment. Morrow justified his comment by explaining that in his experience, female entrepreneurs are often more comprehensive and realistic with their company valuations, which is beneficial when looking to secure investment from experienced business angels.
“Innovative pitching events, such as Angels Den Speedfunding, represent opportunities in which women have tended to excel. Speedfunding is structured around a seven-minute pitch and conversation with one or two angels at a table. These events are defined by their open and collaborative nature, creating an environment that has clearly suited female entrepreneurs,” he notes.
However, this isn’t a view shared by many in the industry, who feel that if anything gender imbalance swings the other way, embracing the confidence of a male pitch more.
Funding is generally decided based on the ability of the start-up team to execute the idea. John Stuart is founder and CEO of Bounts, an exercise-tracking reward app that has raised £750k to date. He explains how he has been through several funding rounds and has never once felt that he didn’t get the funds because he was a man. Nor does he feel as though he benefited because he was a man either. He points out that more women are running start-up businesses than ever before. He quotes the Tech City stats from June 2015 that suggested London is one of the hottest hubs for female entrepreneurs, with women in far more leadership roles than the rest of the UK.
So if both men and women are bidding for angel investment, what can either gender bring to pitching? How do their pitches differ, and what can men and women learn from each other?
Pitching to angel investors requires a lot of guts and a real belief in your business. There are lots of gender stereotypes when it comes to business.These range from women underselling themselves to men overselling themselves. Karen Melonie Gould, CEO of Gateway2Enterprise thinks that if there is gender imbalance this could be because women are seen as the safer investment, as they are deemed more level-headed and tend to have more to lose if they have a family or are a single parent.
She believes that women are able to multi-task at a higher level and can lead as well as manage. “From a personal view point when I pitch for smart investment, which is always male-led, they always look to see who is in my team and if I had an all-female team it would make them feel uncomfortable.”
A recent report entitled StartUpDNA published by Telefónica earlier this year showed that ventures lead by men are 86 per cent more likely to get venture capital funding than those headed by women. At angel funding level there is slightly more equality, but there is still a gender gap - it’s predicted than 59 per cent of funding is given to men over women.
Neeta Patel is CEO at New Entrepreneurs Foundation, a 12-month enterprise programme that aims to develop a new generation of entrepreneurs. She believes there are many reasons for this disparity. “Some are structural, but others are psychological. “There are fewer female investors. The number of female angel investors is certainly on the increase, but the figure at venture capital level is still depressingly low. Although an increasing number of male investors have indicated a desire to fund women-led businesses, there just aren't enough great, women-led businesses in the pipeline.”
Patel believes that there are many reasons why there’s a gender imbalance in venture capitalism and angel investment. “Women are generally less confident 'bragging' about their successes than men and are also less likely to approach potential investors to ask for high levels of investment.” She argues that women are generally good at solving problems in front of them and tend to launch ventures in sectors where they feel comfortable. These might be less ambitious than their male counterparts. The result of this is that male investors may see women launching lifestyle-type businesses that might not seem as profitable as ones thought up by men. “I also think that women are reluctant to give up a chunk of their business to an investor as they identify so closely with it being ‘their’ business.”
In the next instalment of our Angel Investment series, we take a look at the importance of investing in people…