I get asked a lot of questions about female angel funding from business owners and aspiring investors. These questions range from, “are there female angel investors” (spoiler alert, YES) to “what types of companies do female angels invest in?” (That one is a little more tricky to answer, but we’ll get to it in this post.)
While angel investors don’t all follow the same rulebook, there are certain characteristics they have in common when it comes to who they are and what types of businesses they invest in.
Today, I’m going to do my best to answer all of your burning questions about female angel funding to help you, whether you are a business owner or an aspiring investor.
What is the Role of Women in Angel Investing?
The good news is that more women than ever are becoming angel investors. I’m not just saying that to convince you to become an angel investor or to try to find a female angel investor. The research backs this up. Between the years of 2004 and 2016, the percentage of female angel investors skyrocketed from five percent (11,000) to 26 percent (about 78,000).
Between those same years, the percentage of women-owned businesses that received angel funding also skyrocketed, from three percent (about 1,500) in 2004 to 22 percent (about 14,000) in 2016.
Of course, while it’s encouraging to see the growth in the number of female angel investors and female entrepreneurs who are getting funding, the numbers are still pretty low. That’s why I’m working hard to help more women become successful angel investors.
What is Female Angel Funding?
When it comes to women investors and women business owners, there is definitely a trend of women helping women. Female angel funding is a term I use that refers to female angel investors funding women-owned businesses. This can take several forms, including female investment funds.
Of course, there aren’t any rules saying that women investors can only invest in women-owned businesses or that women business owners can only get funding from female investors. However, there is research to back up the claim that women business owners and founders are more likely to get capital money when they pitch to at least one female investor. In exchange, studies have proven that women-owned businesses, on average, generate a better return for investors than male-owned companies.
Female angel funding benefits both investors and entrepreneurs by bringing female investors together with women-owned businesses to help both parties achieve financial success.
What Do Female Angel Investors Invest in?
As I said before, there aren’t any hard and fast rules about what angel investors invest in. That’s good news for entrepreneurs who are looking for investors! You have a lot of options when it comes to finding angel investors who believe that your business has the potential to grow and make them a lot of money.
Female angel investors who are part of an investment group or female investment fund are more likely than male investors to put their money into women-owned and women-led businesses. As women, they understand the hurdles that female entrepreneurs face every day, just trying to prove their worth to investors.
Smart female angel investors will take a close look at a company’s financial statements and business plan to determine whether a business is sound before investing their money. So, no matter how great your idea sounds in your head, you need to get it down on paper in the form of a thorough, well-written business plan if you want to attract angel investors.
As far as what types of businesses angel investors invest in, the sky’s really the limit. Angel investors tend to invest in industries that match their expertise so they can provide the most value. No matter what type of business you are running, you will be able to find an angel investor who has industry knowledge.
Do Female Angel Investors Only Invest in Startups?
Angel investors generally invest in startups or early-stage ventures. They are never the first choice for funding, but they usually come in before venture capital
In general, angel investing comes in during the second round of funding. The first round of funding happens by way of bootstrapping, financing, and crowdfunding. (If you’ve borrowed money from your parents, neighbors, aunt, and second cousin, then congratulations! You’ve gone through your first round of funding).
During the second round of funding, companies have enough of a history to demonstrate that they have the ability to grow and scale.
This is where angel investors come in.
In general, angel investors look for investments that will land them a very generous return, somewhere between 20 – 40 percent of their original investment, which they can find in a startup or early-stage company.
What Does a Female Angel Investor Do?
In addition to giving businesses capital in the form of making a monetary investment, most angel investors also provide some sort of mentorship to the founding team.
In some cases, angel investors like to get their hands dirty, so to speak, by having input on day-to-day business operations. Usually, though, angel investors who want to be involved in business matters only offer input on significant business decisions. They often serve on the Board of Directors and vote on important business decisions. In other cases, angel investors take a more backseat approach.
As a business owner, before you reach out to angel investors, consider what more significant role you would like them to take in the company. You’ll want to make sure that an angel investor who will serve as a mentor shares your core values. Spend some time with them, and be prepared to turn down investors who you don’t believe will serve your business well. I know that you want money, and you want it now. But believe me, it’s worth it to make sure you are working with the right investor instead of just taking money from the first angel investor who comes along.
The same advice holds true for angel investors. If you want to provide mentorship to founders, then do your due diligence to make sure that the founders align with your core values. It might take you some time to find the right business to invest in.
Whether you are interested in getting funding from an angel investor or becoming an angel investor (or both!), you’re in the right place. Become a member today to get access to exclusive investment opportunities you won’t find anywhere else!