Next week, not-for-profit Scale Investors will hold its first meeting for cashed up businesswomen who want to learn to be angel investors.
The “angel investor network” launched on 3 July with an initial goal of matching early-stage, female-led businesses with capital, and a medium-term goal of launching a $20-$30 million angel fund by 2016.
Scale has $600,000 in Victorian government funding and runs an “Australianised” version of Golden Seeds, which has 300 members, of whom about 1 in 5 are male, and has invested in about 60 companies in the past 7 years.
The Melbourne-based network holds two meetings a month: an educational session for investors and a pitching forum that is open to start-ups with at least one female founder or board member with an active role in the business.
“Despite the fact that there are more women starting businesses these days, less than 10% of businesses that receive capital are owned by women,” CEO Laura McKenzie told Business Insider Australia.
“What’s keeping capital from finding its way to these great businesses? I think it is having fewer female investors.”
All Scale investors pay annual fees of $2,000 for an individual membership or $3,000 for a family membership and are required to attend at least five educational sessions.
To be eligible to pitch to the network, start-ups must have a prototype to show off and be willing to give up a 20% stake in what must have the potential to bring in at least $20 million in revenue in 5 years.
Why female entrepreneurs aren’t getting funded
Citing studies by Dell, Booz & Co, and Gartner, McKenzie said women-led businesses were playing a larger role in global economies, and tended to generate higher returns.
But female entrepreneurs tended to have less aggressive capital-raising goals and also tended to lose out to an “unconscious bias”, she said.
“I think we tend to invest in people like us: people we once were or people we aspire to be, and they seem to be people who are referred to us by our networks, which tend to be gender aligned,” she said.
“My closest friends and connections tend to be more female. So, I believe male investors are most likely to come across more male founders.
“And I also think as entrepreneurs, you tend to pitch to people who you feel most comfortable with, and whom are in your existing networks, and those tend to be more along gender lines too.”
Scale thinks its training sessions will spark societal change by creating more female angels who will fund more female entrepreneurs, who will hopefully become investors in their own right.
“Angel investing is a different asset class; there are different risks involved,” said McKenzie, who has 15 years of experience in corporate finance, microfinance and venture capital.
“It’s about portfolio diversification, expectation around terms sheet, how you value a start-up business. [It’s] different to more mature markets.
“[Women] do more research before we invest, and we tend to ask more questions before we’re confident that we have the right knowledge.
“We have come across a number of women who have been successful entrepreneurs in the past, or who have historically been successful investors, together with those who have accumulated wealth during a successful professional career and who are interested in investing in women-led businesses.
“We believe Scale will create a societal change, so from that point of view it’s kind of a philanthropic thing to do, but our definition of success is that the investors, and entrepreneurs, achieve great financial returns.”
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