Women capitalists are forcing change by backing female entrepreneurs on both sides of the Atlantic.
There is an increasing focus on opening up opportunities for women as entrepreneurs and encouraging investment in their enterprises. It also fits with the wealth management sector’s need to grapple with how to serve women more effectively, particularly as a larger number of HNW individuals are female. (See a spread of articles about women in wealth management.)
To give an example of how the culture is shifting, in the UK parliament a few days ago, the Women and Enterprise All-Party Parliamentary Group issued a report, The Future of Female Entrepreneurship. And every year, events such as International Women’s Day are seized upon by business groups, along with many others, to draw attention to female entrepreneurs, women’s attitudes to money, and so on.
Some ideas about how to make it easier for women to build businesses and encourage investment might involve politics, such as helping with childcare and the “work-life balance”, which have been obstacles. (Of course, keeping taxes low and regulations straightforward is positive for all business owners, of any gender.) But women aren’t waiting for legislators to act – that’s a long wait. Women want to use their increasing financial firepower to back to women in business, and there are examples in the US and UK, for example.
In the US there are organizations such as Plum Alley Investments, founded in late 2015 by Deborah Jackson and Andrea Turner Moffitt as a platform to invest in female entrepreneurs while engaging a broader base of investors in the asset class of venture capital. In the UK there’s the Angel Academe, created by Jodie O’Keefe and Simon Hopkins. These organizations are already substantial, and have gained hard-fought experience in managing women-run businesses.
These organizations are tapping into a big potential. For example, for all the noise around the attractions (despite the illiquidity) of venture capital and other private market investing, Plum Alley points out that only 2 per cent of decision-makers in VC firms are women. Some figures are higher: Fewer than 10 per cent of decision-makers at VC firms are women and 74 per cent of VC firms have zero female investors, according to publication Techcrunch last year. That article, by the way, went on to note that women raised a record amount of VC money in 2018.
Other figures suggest that there’s work to do. For example, the British Business Bank Equity Tracker report for 2018 showed that female-founded firms are disproportionately represented in access to growth stage capital. The amount of equity invested in smaller UK businesses rose by 5 per cent to £6.7 billion ($8.38 billion) in 2018, the highest amount recorded. However, concerns have been raised regarding the levels of equity deals that have seen female involvement, the report showed.
The proportion of equity in the UK going to companies with at least one female founder has actually fallen to 18 per cent from 20 per cent in 2017. Companies with female founders were only 5 per cent of total deals and only 2 per cent of total investment value.
“But female founders are more likely to get funded at seed stage with 24 per cent of all seed stage deals being in companies with at least one female founder. This reveals the challenge that women founders have in accessing growth stage capital. The magnitude of the task to get women their fair proportion of equity is vast,” Jenny Tooth, CEO of the UK Business Angels Association, said.
Plum Alley is focused on the STEM (science, technology, engineering and mathematics). Most money raised so far targets consumer or consumer tech-oriented firms. Plum Alley has a portfolio of 16 companies. At the same time, the founders tell this publication, that Plum Alley wants to engage more women investors. Since it was set up, more than 350 people have joined its network.
The insights that Plum Alley provides were brought home to FWR at a recent FOX [Family Office Exchange] Wealth Advisor Forum in the US that was attended by this publication. Among some of the eye-catching statistics that were broadcast at that event were that globally, women control $20 trillion in wealth, and in the US, women are decision-makers for over $11.2 trillion of investable assets. Yet, an estimated $5 trillion of assets go unmanaged and 51 per cent of women feel misunderstood by their advisors.
“We form and manage syndicate investments where Plum Alley members can opt in (or out) of deals. This allows high net-worth individuals or families to build a customized portfolio of investments that aligns with their goals and priorities. Plum Alley is unique in providing a larger base of investors access to make direct investments they would not otherwise see and a way to build a discretionary portfolio of intentional investments. Our model creates a huge multiplier effect and brings more value to founders, investors and to the venture ecosystem,” Plum Alley’s founders told this news service recently.
“Our portfolio of 16 companies represents 70 per cent technology innovations and 30 per cent healthcare advancements. A sampling of our investments includes powerful new environmental technology, education technology, LED technology disinfection, cardiovascular disease device and a bioreactor technology growing bone from stem cells, among other areas. While Plum Alley does not have a stated “social impact” or ESG lens, every company we have invested in makes a real contribution to our quality of life and brings forward something of significant value to people and the planet,” they said.
“Our members benefit from the work led by our team of investment professionals where we source, screen and select the highest caliber companies that meet our investment criteria. We form and manage syndicate investments where Plum Alley members can opt in (or out) of deals. This allows high net worth individuals or families to build a customized portfolio of investments that aligns with their goals and priorities,” they continued.
Women make up a small single-digit fraction of VC decision-makers, which is unacceptable given how important venture capital now is as an asset class.
“We are changing that because we believe incorporating diverse perspectives in determining which companies and innovations get funding will lead to better financial and societal outcomes. We also believe women have a critical role to play to bring more expertise, resources and relationships to help invest and scale companies in fields like healthcare, education, technology and the environment,” the firm said.
Plum Alley has invested the amount of a first-time fund with $15 million invested across 16 companies and its average investment size has been $500,000 to $1.5 million per company where companies are raising $5 million to $20 million at the Series A stage with select seed and Series B investments.
At the UK-based Angel Academe, founder Jodie O’Keefe thinks that risk-taking with a purpose is a strong driver of change that will benefit women.
“It is a good thing to put some of your assets in that higher risk category and have an influence on gender equality at the same time. Joining an angel network is an easy route to becoming an investor. Our network runs investor education workshops and assigns new members a ‘buddy’ to share their experience,” she told this publication.
One risk people can make (playing to ideas of behavioural finance that this publication has chronicled) is the danger of “reckless caution” – of being too conservative over investment and ending up with insufficient money to retire on, or for other purposes. How does this apply to women?
“Traditionally, women have been very risk-averse,” O’Keefe said, “but there’s a downside to that, of missing out on potentially high returns afforded by high risk asset classes.”
Angel Academe is getting plenty of traction. Today it is common to have 80-100 people attending the pitch events that it holds. There are five such pitch events a year, and these are for members as well as new investors who would like to attend one or two pitch events before committing.
There is an advisory board, on which O’Keeffe, who is also managing director of NW3 Ventures, sits. The network has a number of “experts in residence”, people who are senior figures at a number of organizations, such as HSBC (Diana Biggs, head of innovation at that bank). The network is planning for its next major pitch events in June and September this year.
Here are some examples of Plum Alley’s investments:
Aclima - a hyperlocal air quality sensor and data network. The company tracks hyperlocal data analytics on air quality offering a new level of transparency on air quality and climate emissions for governments, citizens, companies and researchers. Plum Alley invested in the company’s $24 million Series A round alongside lead investor Social Capital and other investors, including Kapor Capital, Radicle Impact, and Rethink Impact. Founder Davida Herzl was recently named Fast Company’s 100 Most Creative People.
Mammoth Biosciences – a first-to-market CRISPR-based diagnostic platform to bring an affordable and easy-to-use approach to disease detection. Plum Alley invested in Mammoth’s $23M Series A round led by Mayfield, alongside other investors including NFX, Kairos, and 8VC.
Angel Academe investments:
Enterprise Alumni – Angel Academe members invested in Enterprise Alumni’s third fundraising round, to help the business become the first software company of its size to have a gender-balanced shareholder structure.
Applied – Angel Academe contributed to a behavioral science-based recruitment fair's start-up - £1.5 million raised late in 2018
Doppel – Angel Academe first invested in Doppel in April 2018, then participated in a second seed round in April 2019. Doppel is wearable technology that decreases stress and increases focus.
Streeva – Angel Academe contributed to £264k seed investment early in 2018 towards payment processing start-up Streeva which focuses on automating Gift Aid donations on contactless, adding 25 per cent to charitable donations without extra input from the donor.