Why do we need to change the faces of angel investment?

Last month, Inclusive Angels got together to catalyse a change in the wonderful world of startups and angel investment. Changing the Faces of Angel Investment was designed to bring together founders, experienced and budding angel investors, inspiring a different future for tech businesses.

The evening was jam packed with exclusive insights and expert advice. If you missed it, we’ve got you covered with the top takeaways. For founders looking to embark on their investment journey, check out our breakdown of three women founders who have been there, done it, and gathered the amusing stories to share with us.

For those of you who are interested in the other side of things, stay here. In the second portion of the evening, we heard from four angel investors. These women were keen to share their wisdom and dispel some myths about becoming an angel investor. If you think you don’t have the knowledge, resources or expertise to be an angel investor, then we particularly want you to hear this. 

Warming us up to hear from the investors themselves, Amy Newton, Founder of Newton’s Theory & Inclusive Angels explains, “Our overarching aim is really to inspire you that we are a generation of women with our own wealth and we can flex our wealth to make social changes that will benefit us all.”

“As investors, there’s an opportunity right now to ride the wave of women and global ethnic majorities awakening as consumers and business owners to where they choose to spend.”

Hatty Fawcett, Founder of Focused for Business is a soon to be angel investor. She currently works with startups to help them get funded. She has extensive experience in the investment world, having looked after some of Kelly Hoppen’s Dragon Den investments. “I’ve seen what it is to be a founder and what it is to be an angel investor,” she tells us. 

“These days, I run a funding accelerator that’s designed to help founders raise their first or second round of funding. We’ve supported 93 founders in the last two and a half years, 50 of those have got funding, and 25% of those were women. So I beat your stats. Last year we raised £5 million.”

Puja Balachander, Head of Venture Launchpad Carbon13; exited founder & angel investor introduces herself, “I’m an angel investor, former founder, but also a climate tech VC in my day job as well.”

Puja founded a business during her MBA: “Over the next three years, I became a solo founder of a company that went through a lot of team and investment challenges along the way. We got acquired by a US-based company about 18 months ago. I was working as the Director of Product at that company post-acquisition for 18 months during my vesting period.

“I decided I wanted to get into climate tech. I joined Carbon13, which you may have heard of. It’s a venture builder and now accelerator as well, an early-stage climate tech VC that’s based out of Cambridge. We support founders, building companies with massive decarbonisation potential. I lead their accelerator programme, so if you, or anyone you know, is an early stage, climate tech founder with a team and idea but hasn’t raised equity yet, please come talk to me.”

Ursula Morgan, is an Astia adviser and MD at Beyond Bamboo. When Ursula moved out to San Francisco temporarily, she got the tech bug and ended up settling for a while. “I was one of the 2% of female founders in the US that actually got funding from VCs,” she tells the group.

“Because of the experiences that I had, I started volunteering and then investing in businesses from a fund called Astia in the US. It was started to fund underrepresented groups and women in particular. I was able to give back the luck that I had and was able to advise and invest.”

Samantha Wood, Founder & Director at Wood Mitchell Financial Planning, describes herself as “a financial feminist.”

Sam explains this is connected to Amy’s initial message around women’s wealth growing: “I do feel like there’s a movement of empowerment for women, a movement of choice. 60% of wealth is said to be in the hands of women in the UK, by 2025. Yet over 55% of women have never undertaken any form of investment at all. In fact, most women will lose around a million pounds in their lifetime, because they do not invest.”

As a result of these staggering statistics, Sam decided to found her own wealth management practice. Her ambition is to create a different relationship with investing for anyone who may not be familiar with the process: “It’s about education, knowledge and confidence. And that starts with you. And then you can move into the other areas like angel investing,” she explains.

There are still some discouraging facts, as Ursula illustrates: “They had to reach out to 60 people on average to get funded – before this, it was 5 people. The other thing is it took an average of six months for the funds to come through for a white female founder, and almost nine months for a black female founder.” Despite this, it remains a profound piece of work and a key example of how organisations can step up and embody the change we want to see. 

Amy says to the panel, “I have heard anecdotally, that institutional investors are putting pressure on VCs to invest in more diverse founders. Do you think we’re seeing that?”

Puja responds, explaining that it’s not a strict mandate within Carbon13 to have precise figures for demographics, however, there is an increased push to encourage people of colour and women: “One of the things we did pretty aggressively was to go on LinkedIn and find women and people of colour who fit the profile that we would want to invite in to apply to this White House Fellowship.

“Once we did, it was insane. The conversion on just a LinkedIn message saying, ‘hey, we think you’re a great fit, you should apply,’ was huge.”

Spaces within the angel investment community remain male-dominated. How can we fix this?

Sam begins with an anecdote of a conversation she had that very evening, where two women said to her ‘we came along because we’re nosy. “I think that’s absolutely brilliant,” Sam says. “I would encourage anybody to be in the room. That’s one of the first important things in terms of getting involved in angel investing. I’m part of many angel investment networks, and I still feel like I’m one of the few women in the room.

“There’s a lot of stats that show female investors tend to make better returns, whether that’s personal investing, or investing in a business. It’s not because women can be more risk averse. No, it’s because women are more risk aware. Women tend to take calculated risks, and therefore they’re thinking much longer term.”

Hatty says she sees daily evidence of this through her work: “Everyone who goes through the funding accelerator has to spend time working on financial forecasts. It’s really noticeable how the forecasts from the female founders are just more credible. It’s not that they’re not ambitious. They’re just more credible.

“2.5x more profit is what female founders deliver, Boston Consulting Group data found. 2.5x more profit, and 10% more revenue over five years than male founders.”

Through her work, Sam sees the investment gap between the genders in plain sight: “I often sit down with a household and most of the time the women will take some or most of the burden around childcare: we take maternity leave, we take some time out of work, we take a bit of a setback on our careers, we earn less. I see this all the time. And by the way, I did the same. There’s absolutely nothing wrong with that.”

Sam explains there are a huge number of who are simply not financially secure because of this setup. This is particularly true when it comes to our pension pots. “I’m one of those women who has been divorced and didn’t have any access to any pension. And therefore we have this huge gap of women that are left not financially secure, trapped in situations, jobs and relationships.

“Unless we change the basics, how are we going to encourage more female investors and more female founders to get out there and do what we know they’re all capable of.”

“The real reason we need more diversity in angel investors is to commit to the change you want to see in the world,” Hatty says. “We all have different perspectives. If those perspectives are not in the room, or if they are in the room but they can’t speak or share their perspective, then change isn’t going to happen. We’re not going to invest in more diverse founders.

“We bring different perspectives. We bring different interests. We are more focused on collaboration and communities serving niche groups; it’s not just about growth at any cost.”

The problem with the lack of diversity in angel investment is that we have a long way to go in balancing it. Ursula tells us her theory likens this to our approach to the climate crisis: “Sometimes we think, there’s so much happening. There’s so much we have to do. I’m not recycling that tiny little plastic even though I’ve done all of this over here. It feels so overwhelming.

“Oh, where do I start? Start with 100 quid. You don’t have to be a millionaire. Maybe don’t go on that extra trip to Lanzarote, put that money into this amazing woman that you just met with this amazing idea. Roll with it, play with it and don’t feel overwhelmed, just participate.”

Why do we even need a diverse set of investors in the world? Isn’t money just money? Puja summarises it eloquently as she says, “We see problems other people don’t. From this, we see businesses that can be started to solve these problems.

“You have the expertise, you potentially have the capital, why not? It is genuinely a really enjoyable experience.

“You need less money than you think to get started. Now I hang out with my MBA friends, and we talk about the companies we want to invest in on a girls night, and it’s genuinely really interesting. And it’s intellectually stimulating. It’s fun, it takes less money, you see problems other people don’t, and you can make some money, so really exciting.”

If you don’t have the funds, it doesn’t mean you can’t get involved in other ways. Hatty recommends offering your skills to an early-stage startup: “On the accelerator, we introduce startups to mentors who can help on the specific areas of expertise that they need.”

This can be a great way to get to know a founder, build a relationship and see if you want to become an angel investor. “Maybe it is five months down the line after you’ve built trust rapport and seeing how somebody responds under pressure to feedback,” explains Hatty. “Then you have more confidence to invest the hard cash because you’ve seen how somebody responds in different circumstances.”

Sam echoes this sentiment: “Sometimes what you need as a founder, as a startup is not just money, it’s people around you that are going to give you advice. People that have had failures or have gotten the connections. Sometimes it’s like, okay, I can’t get involved right now, but I can connect you. I think that can be so powerful.”

Amy closes the discussion by announcing that Inclusive Angels is planning on sharing a list of angel groups where you can continue to learn more about investing. She says to the group, “The ripple effect is as women we have wealth. We haven’t perhaps historically been taught to use it in the same way financially. It’s about us taking that step forward and grabbing that knowledge for ourselves and seeing angel investing as a social change.”