Celebrating female angel investors

Why there are so few and what we’re doing about it…

Eva-Maria Dimitriadis

This International Women’s day there are countless articles and initiatives focused on better equality in the workplace, shared parental leave, better childcare models, more women in politics, and female founders. On all of these points and initiatives I agree. But this article is in praise of the female angel investor, and what we are doing to multiply this rare and wonderful breed. 

According to the UK British Angels Association (of which I’m a proud member), women represent only 14% of UK angel investors. Yet women have more financial power than ever before, with over 60% of the nation’s wealth expected to be in our hands by 2025. So, why aren’t we being a little more angelic? 

After surveying a group of high-net-worth (HNW) individuals about their investment habits, it was clear there are numerous barriers preventing women from making more active angel investments, that is, investing their own money in small businesses in exchange for an equity stake. Typical barriers range from lack of access to good deals to not meeting the minimum ticket size requirements. All of the obstacles mentioned are things that we aim to solve at Conduit Connect by syndicating investments into high quality vetted deals for HNW individuals and sophisticated investors. Based on all the feedback it was clear that what many women want is a recipe to get started. Here’s an attempt to provide some food for thought:  

R is for RISK – It comes as no surprise that for many people, (men and women alike), the primary barrier to angel investing is that it is perceived to be too risky. It’s true, most startups fail, and venture investing is not for the faint of heart. Most advisors will discourage you from putting more than 5 or maybe 10% of your investible assets into venture capital, and they would be right to do so. Angel investing is by nature risky, illiquid, and requires patience. But while it may be high risk, it can also be high return. So I like to think of it as ‘the last 5%’. This is where to make an impact with the last 5% of investible assets, after you’ve ensured you’re putting enough away into pensions, ISAs and your rainy day fund. 

E is for EDUCATION – Many women say they just ‘don’t know how’, or ‘wouldn’t know where to start…’ Last year Conduit Connect launched the Generation Impact Academy for angel investors, family offices and also professional investors to come and learn the practical tools to start building a direct investment portfolio. In this course you learn from experts about how to build an investment thesis, study term sheets, understand dilution and provide more than just capital to build a meaningful portfolio. In each cohort to date, I have been thrilled to see a miraculous 50:50 split of men and women taking the course. 

C is for CONFIDENCE – Even some of the most financially literate women who spend their day jobs investing other people’s money, feel that they lack confidence investing on their own behalf. They worry about getting it right. The truth is, you won’t get it right every time. In fact, mostly you’ll get it wrong. So start with a deal where the business model is clear and you can really understand how that business will make money. It doesn’t have to be the cure for cancer, or the solution for hydrogen fuel. It just needs to be a good, sensible business. Start small… And then do it again. (See P is for Portfolio)

I is for …. There is no I in team – Ok, this one is a bit of a cheat, but really there is no need to angel invest on your own. With Alma Angels, Angel Academe, Conduit Connect and others, there are a number of established and regulated groups you can join to organise your angel investing activities. Being part of a wider group allows you to benefit from the expertise, access, deal-flow and co-investment opportunities offered by the network. Working as a team is far more rewarding. 

P is for PORTFOLIO – Data suggest that only one in fifty venture-backed companies becomes a Unicorn (a company with a valuation over $1 billion). That means if you want to invest in a unicorn, then you probably need to invest in – you guessed it – fifty good companies. So, if you think you can just put a thousand pounds into the first cute pitch deck you see and pray for rain, then you probably want to rethink your strategy. Diversification is your best risk management strategy. One way to achieve this is to consider something like an EIS fund alongside your direct deals, allowing you to dip your toe in a broader set of opportunities.  

E is for EIS – Initiated in 1994, the Enterprise Investment Scheme (EIS) was set up by HMRC to encourage and reward HNW individuals to invest in early-stage businesses helping them grow. Since then over £24 billion has been invested into 32 thousand companies. Eligible investors receive significant tax breaks on their investments, including 30% income tax relief, loss relief on deals that don’t work out and tax-free capital gains on those that do. (Earlier stage SEIS investments benefit from even more generous 50% income tax relief but being earlier-stage, the businesses are deemed much riskier). The envy of angels around the world, this scheme can really help to cushion the fall from those deals that don’t work out. 

While the gender gap between male and female founders has been closing over the last decade, the gap between male investors and female investors is still very wide. At Conduit Connect we have incredible diversity both amongst our community of 1,982 investors and amongst our portfolio of 117 startups. Diverse investment groups attract more diverse founders and this leads to opportunity. Take FemTech for example. When you’ve put all your sweat, blood and tears into building a business about menopause, or plastic-free period products, or female fertility, you’d quite like to have a few women to back up your problem statement and fund your solution. That’s not to say that women should only invest in female founders or female products but merely to highlight that there are plenty of ripe opportunities for all angels to get a seat at the table. You don’t have to be a squillionaire or a software engineer to get started. The joy of angel investing is that it’s not just about the money. The most rewarding part is offering time, support and guidance to founders as they take flight, and it’s the most exciting time to be part of their journey. 

Eva-Maria Dimitriadis is Managing Partner at Conduit Connect, an impact investing platform that provides members with Education, Direct Investment and Fund Investment opportunities.

Please note

The Conduit Connect does not provide financial advice! This article is provided for information and educational purposes only and does not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.