Investors tend to invest in people who remind them of themselves. As most individual business investors, known as ‘business angels,’ are men, it’s perhaps not surprising that the number of female entrepreneurs who get this kind of funding is also tiny.
But things are improving. There have been a number of initiatives in recent years to promote more female investors and there are signs that the number of women business angels is beginning to increase. This article outlines where you can find female business angels and how you can improve your chances of finding funding.
Who are Business Angel investors?
Angel investors are generally well-off people who provide small investments for start-ups or growing businesses. In return, they usually receive equity – a percentage of the ownership of the business. There are generous tax breaks to encourage business growth with this kind of investment, through the Government’s Enterprise Investment Scheme and the Seed Enterprise Investment Scheme.
TV Dragon’s Den investor Deborah Meaden is the best-known UK female business angel. She also exemplifies many of the differences research finds female angels are likely to demonstrate. Women business angels are much more likely to want to invest in businesses that are socially beneficial. Deborah Meaden is no exception, well known in the ‘Den’ for seeking out ethical and green investments. These include reestore, the eco furniture design company, which turns household and industrial waste products into beautiful and functional furniture.
Meaden accepts that her Dragon’s Den persona is a caricature: “nobody is like me on TV – surely only Cruella de Ville or the wicked witch on snow white. It’s me, but it’s me in that environment.” In reality, “people can call me what they like, fat, ugly, sour. But tell me I’m not fair, tell me I’m not ethical, those are the things that bother me.” Female investors also tend to invest more time in mentoring their investees and that’s something that female-owned businesses particularly appreciate.
A study by NESTA found that the average investment was £42,000 and the average equity stake was 8%. There’s no ‘set amount’ for angel investment which can be as small as £5,000 and go up to several £million. Angel investors will be looking for a good return on their investment and they are generally looking for an exit, or sale of their shares, within 5 years.
Most business angel relationships are sourced by the business seeking investment through their own networks. There are also several Business Angel Networks that help to match-make businesses with potential investors. Those networks also enable angel investors to share research efforts and pool capital.
Female Business Angel Funds in the UK
In 2009 the percentage of female business angels was estimated at just 4% of the total number. It is now 14% with 5000 female investors. So while it is still low, the supply of female business angel investment has increased considerably.
There seems to be some symmetry between the supply of female investors and the lower take-up of investment by women-owned businesses. A number of initiatives have sprung up to deal with this issue. If you’re a woman looking for investment (or you want to become an investor) they may be a good place to start:
Addidi Business Angels is a women-only angel investment club, which brings together 20-30 female investors, who each commit to investing £20,000. The club pool investments in small growth companies.
Angel Academe: An angel investment group focused on supporting and investing in female-led technology startups.
Female Founders Fund (F3): A venture capital fund investing in early-stage companies led by women, primarily in the technology sector.
Investing Women: An angel syndicate and venture capital firm dedicated to funding and supporting female-led businesses across different sectors.
Angel Investment Network: A platform that connects entrepreneurs with angel investors, including those interested in supporting women-led businesses.
Other female-focused investment initiatives
While not strictly defined as business angels, other female-focused investment initiatives include:
Astia aims to provide access to the networks and expertise that women high-growth entrepreneurs need to succeed. It supports eligible businesses at any stage of development. They need to be able to demonstrate high-growth potential and have at least one woman in a leadership role. The Astia network links supported businesses to growth opportunities including investment.
Innovate UK Women in Innovation: This program provides funding and support to female innovators through various grant schemes and competitions.
Funding for women in business. See our guide for alternative funding options.
Top Tips for Gaining Business Angel Investment
1. Build a strong network
Networking is crucial for connecting with potential angel investors. Attend industry events, join entrepreneurship communities, and seek out organizations that support women in business to expand your network.
2. Research and target angel investors
Understand the investment preferences and focus areas of different angel investors. Look for investors who have shown an interest in supporting women-led businesses or specific sectors relevant to your business.
3. Craft a compelling pitch
Develop a concise and compelling pitch that clearly communicates your business idea, unique selling points, market opportunity, and growth potential. Highlight your team’s capabilities and emphasize why your business is investment-worthy.
4. Leverage mentorship and support programs
Seek out mentorship programs or accelerators specifically designed for female entrepreneurs. These programs often provide access to experienced mentors, valuable guidance, and connections to potential investors.
5. Prepare a thorough business plan and financials
Demonstrate a solid understanding of your business model, market analysis, and financial projections. Investors want to see that you have a clear strategy and a realistic path to profitability. Here is a useful guide to writing an effective business plan.
6. Showcase traction and milestones
If your business is already generating revenue or has achieved significant milestones, highlight these achievements to demonstrate traction and market validation. This can increase your attractiveness to angel investors.
7. Seek introductions and referrals
Leverage your network to secure introductions to potential angel investors. Warm introductions from trusted contacts can significantly increase your chances of getting a meeting and building rapport with investors.
8. Be persistent and open to feedback
It’s common to face rejections or receive feedback during the fundraising process. Learn from each interaction and refine your pitch based on the feedback you receive. Persistence and adaptability are key in securing angel funding.
Remember, securing investment is a process that requires time, effort, and perseverance. Stay confident, stay focused, and keep refining your approach based on the insights you gain along the way.
Photo: CC Felipe Neves via Flickr
The trapezia venture capital fund is currently raising funds for a second investment round.