Do Women Make Better Angel Investors Than Men?

By Rieva Lesonsky

If you’re looking for angel capital, what’s the best way to boost your chances of success? Does it depend on your connections? Your business plan? The images you use in your PowerPoint presentation?

No, no and no. Instead, your success could depend on how many women are in the investor group you’re pitching, according to some new research from the University of New Hampshire Center for Venture Research.

The research by Jeffrey Sohl, director of the UNH Center for Venture Research, and John Becker-Blease, of Oregon State University, studied 183 angel investment groups from 2000 About 60% of small-business bank-loan applications have been rejected this year, according to a study by Pepperdine University to 2006. The researchers found that an angel investment groups with only a small percentage of women investors tended to be more cautious about investing. However, as soon as women composed more than 10 percent of the investment group, the group became more active and made increased investments.

“At first the results were counter-intuitive, since previous research on women investing, in general, shows women to be more cautious investors. Since angel investing involves substantial risk, one would assume that this cautious behavior would also be exhibited in angel investors,” Sohl said. “However, our research indicates that when the number of women in an angel group increases, so does their investment activity as angel investors.”

The researchers say this behavior is based on “stereotype threat.” According to this theory, when a stereotype exists about a person, that person will conform with that stereotype when they are in a situation that highlights their status as an outsider. In other words, the fewer women in an angel group, the more women stand out, and the more likely they are to conform to stereotypes that they’re cautious investors. “As the number of women increases, there is less of a stereotype,” Sohl explained, noting that the more women in a group, the more they are recognized for making smart investment decisions as opposed to just for being women.

The Center for Venture Research has been studying the angel market since 1980. While Sohl says the percentage of women angel investors has remained fairly constant at about 15 percent over the last five years, the number of women pitching angel groups has grown from 13 percent in 2006 to 20 percent in 2010.

The current research suggests that forming more women-dominated angel groups would boost investment in all types of startup ventures—not just those that are women-owned—by making the angel groups more likely to make larger investments and more investments. So if you’re considering seeking angel capital, looking for a group that’s got a sizable percentage of women could give you the edge you need.

Image by Flickr user Randy Robertson (Creative Commons)

This entry was posted on Wednesday, August 10th, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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