According to the most recent figures from the British Business Bank, only 9% of business angel investors in the UK in 2017 were women (up from 5% in 2003). Across Europe, according to EBAN (European Business Angel Network) 11% of investors were women. This compares with around 20% in the US. As a result there is growing interest in women angels and in new initiatives to support and encourage them.
However, according to new research, led by the University of Edinburgh Business School in partnership with Professor Colin Mason (University of Glasgow) and Dr Tiago Botelho (University of East Anglia), on women angels in the UK, there are systematic differences between women and men investors, and members of women-only networks do differ from women who join mixed networks. These differences continue to constrain women’s participation in the angel investment market.
Women investors do appear to have a lower propensity for risk and a more conservative attitude to investment: they made smaller and fewer investments, were less likely to invest in innovative ventures, and were slightly less likely to have invested at seed stage.
There is also evidence of a ‘second glass ceiling’ or ‘glass wall’ effect in terms of women investors not having the opportunity of acquiring the knowledge, skills and experience to become angel investors. When compared with male investors women are younger and are less likely to have entrepreneurial backgrounds as either CEO of an entrepreneurial venture or in an MBO. This suggests that the growth in the number of women angels is bringing in women with different backgrounds, attitudes and experience, and with correspondingly different development needs and expectations.
In terms of networking, women were less likely to be members of angel groups, which are almost entirely male in membership, suggesting that in the angel market investors prefer to invest in and with ‘people like us’. Other recent evidence suggests that women were less likely than men to invest as solo investors (15% vs 23%) and were three times less likely to lead deal-specific investment syndicates (British Business Bank 2018).
Business angel investment is a predominantly male activity, and recent research confirms that in terms of competition and performance women perform less well than in single-sex environments.
Accordingly, women and men do appear to differ in how they participate in angel groups. While women are members of (largely male-dominated) angel groups they do not participate in them as fully as men and do not use the knowledge and opinion of other investor members as extensively.
One response to the impact of competition on performance is the establishment of women-only business angel networks. The research demonstrates that there are differences between the profile and behaviour of women in women-only networks and in male-dominated networks. Members of women-only groups are significantly less likely to have board-level experience and appear to be more risk-averse than members of mixed networks. They made significantly more investments, suggesting that a women-only environment provides both a learning opportunity and a ‘safe space’ for investing. Finally, they are much more open to the opinion of others (in the form of group gatekeepers and other investors). This finding reinforces the idea that women-only groups can provide a positive environment for female angels to listen to other investors’ opinions.
There are two broad sets of immediate implications from this research.
Angel characteristics and behaviour
The woman business angel population has developed as a dual population. On the one hand, there are the ‘women angels as honorary men’, who are members of male-dominated business angel networks and share many of their characteristics and pattern their investment behavior on their male counterparts. On the other hand are women who have recently entered the angel market who are more likely to join women-only angel markets to avoid the competition and stereotype threat characteristic of male-dominated networks.
Public policy and entrepreneurial practice
The emerging disparity of the women’s angel market suggests that different kinds of support are needed. This might include support for the development of woman-only angel networks, in order to provide legitimacy and a ‘safe space’ for networking, learning and support.
In terms of attitudes and mindsets, women tend to underestimate their capacity to make ‘risky’ investments. In the absence of role models they have less understanding of the calculus of business angel investing (the ‘rules of the game’), and may be constrained by the conflict between the time demands of managing the domestic economy and their own careers. Proactive angel investors are discouraged by the stereotypical image of the angel investor as a late middle-aged male ex-entrepreneur which is at odds with their self-perception of their skills and experience.
In terms of lack of awareness, fewer women entrepreneurs have raised equity investment for their businesses, and so fewer have exited and become business angels. Given that the profile of most business angel network members is male, the services offered and the way they are delivered reflects this male audience. As most network managers are also male and almost 1 in 3 networks in Europe have no women members, it is a confident woman who is prepared to join an all-male network as a novice investor.
Business angel networks have evolved to meet the needs of their predominantly male clientele in terms of deal flow (sector and investment size preferences), meeting schedules, learning and development opportunities and support, where women place more emphasis on doing it ‘the right as opposed to men doing it their own way. There is there is therefore a strong case for women-only angel networks and training programmes to address the potential differences between their male counterparts.
Professor Richard T Harrison is the chair in Entrepreneurship and Innovation at University of Edinburgh Business School.