Gender Parity In Angel Investment: So Close Yet So Far

Women today are breaking through the glass ceiling. More women are entering the boardroom and joining the C-suite. But these hard-won achievements may not last without a healthy pipeline of mid-level leadership, according to a Women in Leadership report by the IBM Institute for Business Value.

The report indicates a significant decline of women in middle manager and senior manager positions in 2023. These roles act as the feeders of future C-suites and executives, and a decrease in women’s participation jeopardizes the prospect of future women leadership.

“While we may be fixing things at the top, the issue of gender parity is still pervasive. There’s no better time than now for us to push ourselves forward as advocates for one another,” said Ng Lai Yee, managing partner and country leader of IBM Consulting, Singapore. “I think women supporting women will be significant moving forward.”

Women-for-women

This worrisome pipeline of women leadership is not only happening in the enterprise space but also in the investment sector. Ng said only 2% of venture capital (VC) is invested in women-led startups, creating a significant gap for gender parity in the VC and startup landscape.

Aiming to inspire more women leaders to support women entrepreneurs, IBM Singapore recently gathered women executives and angel investors to explore the opportunities in women-for-women angel investments.

“Our goal is to democratize angel investing,” said Maaike Doyer, founder and managing partner of Epic Angels, a female-only angel investors community.

According to Investopedia, an angel investor is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership of equity in the company. With male investors dominating this scene investing with conventional priorities, Epic Angels aims to transform the landscape by encouraging more women to be angel investors.

A women-led Shark Tank

With more than 250 angel investors, Epic Angels is the largest global female-only angel investors network investing in Asia Pacific. It has created opportunities for women-led startups by investing more than USD 1 million.

Doyer said the network focuses on creating opportunities for both women investors and entrepreneurs by providing access to deals, lowering the barriers to entry, and building confidence in investment through education.

“I firmly believe that the private market is going to open up,” said Doyer, also a seasoned angel investor. “It is going to be more accessible for everyone to invest in the private market.”

She noted that angel investment does not necessarily mean investing a large sum of money; at Epic Angels, women can already invest with just SGD2,500. More importantly, angels should support startups with capital, knowledge, and network—qualities increasingly available among women leaders.

Sweet spots for angel investors

Despite an exciting women-led startup scene and rising demand for female investors, Doyer said angel investors have a narrow sweet spot at the startup’s maturity journey.

“Typically, an angel investor’s sweet spot is at the seed stage,” she said. This is the early stage when a startup needs the extra capital to launch its products or services and kickstart an initial revenue.

Hence, the capital required is typically smaller, and the investment barriers are lower. Nevertheless, Doyer suggested that investors put no more than 5% to 10% of their assets into angel investment and focus on portfolio diversification. She said angel investors should continue their existing investment in areas like real estate and the public market but be comfortable investing USD10,000 annually into a few startups.

Doyer noted that new angel investors should also understand their investment thesis. “What is important to you? Or what is your interest area? Your passion, anecdote, knowledge area, what do you like?” she said these are some of the questions new angel investors should ask themselves.

With the rising awareness of diversity and gender parity, Doyer said more women are leading startups to tackle these issues. Yet, traditional male mentors often lack the capacity and personal experience to support them. Thus, Epic Angels focuses on helping startups with women as co-founders or C-level executives.

For angels focusing on technology, Ng also suggested that they refer to IBM’s Seven Bets, a report highlighting technology trends that propel future growth. On top of the popular areas like Gen AI, customer experience, and digital products, the report also highlights the future growth from metaverse, sustainability, new social contracts, and resilient agility.

Finding the investment gem

The next step is finding potential startups. Epic Angels, on average, presents four startups a month to its network of investors. In addition, new angel investors can also access potential startups by participating in accelerator programs as mentors or judging panels.

“They need female mentors because the majority is men,” she said. “This is a great way to know the startups and understand what makes a goods founder a good startup.”

A promising startup often comes with a great team, meaning their expertise, ability to work together, and capacity to pivot as the market changes.

Another essential evaluation factor is traction. While early-stage startups often have limited revenue streams, they must take action to understand the potential customer and to prove that their offerings are solving a real problem. “Founders that stay behind their laptops working on a product without speaking with their customers is simply a recipe for failure,” she said.

Numbers in a business plan are always helpful in evaluating a deal. Still, Doyer said angels should also look for startups with a bit of magic—the uniqueness and competitive edge that has yet to be discovered.

“The actual numbers will always be different,” she said. “It’s all about understanding the assumptions behind the numbers and feeling comfortable with it.”

The exit, return, and value

Finally, Doyer suggested that investors be patient for exit opportunities, as IPOs often take years. Thus, most angel investors exit through mergers and acquisitions, likely to take three to six years.

Another exit opportunity is when the startup reaches series C funding. In this pre-IPO round, larger institutional investors are cleaning up smaller individual investors.

On top of finding an investment gem to drive maximum financial return, Doyer said the value of being an angel investor lies in the rewarding learning experience.

Working with startups, advising on different business dynamics, and supporting younger generation women contribute to many angels’ continuous learning cycle. “I’ve been doing this for years; still, we learn something new every day,” she said. “It’s like learning on the go and daring to feel a bit uncomfortable."

Sheila Lam is the contributing editor of CDOTrends. Covering IT for 20 years as a journalist, she has witnessed the emergence, hype, and maturity of different technologies but is always excited about what's next. You can reach her at [email protected].

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