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Addressing the Gender Gap in Angel Investing

Nicola Corzine

Executive Director, Nasdaq Entrepreneurial Center
gender gap angel investing

Over the last decade, the angel investment industry has “grown up” substantially. The University of New Hampshire’s Center for Venture Research estimated that about 300,000 people made angel investments in the last two years. While that number has increased 29 percent in the last 10 years, there are many more qualified individuals — over 3.7 million, to be exact — who’ve stayed far away from this field. The reasons for this are numerous, but the trends around gender deserve a thoughtful review.

Let’s take a closer look at that 29-percent increase in the overall numbers of angel investors. During those 10 years, the percentage of women angels grew more than 86 percent to comprise 26 percent of the field overall. While this is a long way from an even split, women angel investments did contribute more than 234,000 new jobs and nearly $8.5 billion in capital raised in 2014. Compare this to 2004, when women made up just 5 percent of angel investors overall. Over a comparable period, women angels helped create just 7,000 new positions and invested $1.1 billion in capital.

gender gap angel investing

Center for Venture Research, University of New Hampshire

But does the significant change from 2004 to 2014 give credibility to the idea that an increase in participation from women angels happened by design rather than by luck? As much as I would love to say that’s the case, it’s unlikely.

In 2004, there was a push for women-led firms to close a supposed education gap by “increasing their ‘investor readiness’ through education and networking.” Ten years later, we’ve moved away from this call to action for women-led ventures and instead applied it to minority-owned startups, who are told to “increase the quality of these entrepreneurial ventures” to improve the yield (investment) rate. 

While education is a consistent message — and something we vehemently support for all founders at the Nasdaq Entrepreneurial Center — the problem isn’t that angel investors and entrepreneurs from diverse backgrounds are lacking skills.

Rather than access to education, the focus should instead be on providing access to opportunity — including mentors and investors — in an unbiased pattern-matching approach. Interactive Touch CEO and founder, Ameen Safir has a great definition of pattern-matching for VCs: “It’s a simple approach used by VCs, who see hundreds of companies a year and naturally evaluate startups and entrepreneurs based on what has worked before.”

I’m not suggesting we utilize pattern-matching out of the goodness of our hearts but rather because applying such a methodology and model fundamentally outperforms the alternative. Allow two recent statistics within the venture community to highlight:

  1. Companies with three or more corporate directors who are women (in at least four out of five years) outperformed those with no women on the board by 84 percent on return on sales (ROS), 60 percent on return on invested capital (ROIC), and 46 percent on return on equity (ROE).
  2. A 2009 study in Silicon Valley found that venture-backed companies run by women had annual revenues that were 12 percent higher, used an average of one-third less committed capital, and had lower failure rates than those led by men.

Perhaps the gender discrepancy persists not because people lack access to education, but because we’re slow to accept a new kind of pattern-matching happening under our noses. Today, 71,000 more women angel investors are pattern-matching, mentoring, teaching, and supporting entrepreneurs. And more than 3,900 women-led companies from 2014 are now mentoring other early-stage founders and entrepreneurs, serving as role models to the next generation of innovators.

These statistics alone give us hope that old habits of pattern-matching can be reversed to foster a more diverse base of entrepreneurs who are equipped to boost local communities, improve social and business initiatives, and — let’s not forget — yield greater investment returns and a healthier global economy.

Nicola Corzine

Executive Director, Nasdaq Entrepreneurial Center

Nicola Corzine is currently the Executive Director of the Nasdaq Entrepreneurial Center, a San Francisco-based non-profit organization designed to educate, innovate and connect aspiring and current entrepreneurs. Serving and supporting…