By Allie Felix
There is a glaring gap in angel investing and venture capital: far too few women are writing checks and far too few women are getting funded.
Pitchbook data shows that women-founded companies represent just 25.5 percent of total VC deal count in the US. Additionally, just 16.1 percent of the national firms have a woman decision-maker on their team.
At the same time, women check-writers are more likely to invest in women founders. So, in order to progress the amount of capital allocated to women founders, we need better representation at the institutional level.
Here are three steps to take toward investing in areas you’re passionate about to help close the gender gap in tech startup funding.
1. Honing your thesis
Your investment thesis is the driving vision behind how and why you choose startups to invest in. By honing your thesis, you can become a more focused investor, making it a good starting point for entering startup investing as an angel or in a venture capital role.
A well-defined investment thesis will help you determine how to source deals and make investment decisions. To get started, consider the following:
- Professional Expertise. Your investments can be guided by your education and experience (such as financial services or insurance). Alternatively, your investing thesis can be a vehicle to explore unfamiliar sectors that pique your personal interest.
- Point of View. If your interest and experience have led to a strong point of view, consider seeking out companies that align with that particular approach to the sector. Your beliefs about the consumerization of healthcare, for example, might drive you to seek out startups innovating for that use case.
For example, Karin Dillie, a tech leader featured in a New York Times article, has built a career working in sustainable fashion at tech-enabled startups that have pioneered the space with brands like The RealReal and Recurate. Her experience in that sector has not only driven where she works, but has also developed and refined her passion for investing in new tech ideas contributing to the growth of the industry.
While Karin participated in Hustlefund’s Angel Squad program to sharpen her investor skillset, her career has defined her subject matter expertise and helped her develop a point of view to become a strong angel investor in her respective industry.
2. Finding your entry point
Investing in startups is more complex and nuanced than investing in public markets. After developing your thesis, the next step is to ensure you have a solid grasp of the various ways to invest in startups.
Until recently, startup investing was not accessible to most people. The Securities and Exchange Commission (SEC) requires accredited angel investors to have a minimum net worth of $1 million or an annual income of at least $200,000. However, there have been calls to loosen accredited investor requirements so that more individuals can benefit from the wealth creation associated with startup investments. This includes:
- Equity Crowdfunding. Platforms like Republic have democratized access to building a startup portfolio by allowing small investments (as little as $100) in exchange for equity. For the startup, all investors roll up as one line item on the capitalization table, so they can raise funds from many different investors without managing too many stakeholders.
- Series 65 Exam. If you are not yet an accredited investor, you can become one by taking the Series 65 exam, which covers topics such as financial markets, investment vehicles, investment strategies, financial regulation and compliance, and ethics. In fact, Hustlefund’s Angel Squad will pay for your Series 65 exam fee (more information here).
Before making your first startup investment, it’s important to understand the accredited investor rules and ensure that you qualify under one of the SEC designations.
3. Finding a community to learn from
There are countless educational resources and communities that can shed light on the black box of startup investing and support your investing journey.
- Educational Programs. The most cost-effective way to get started is through the endless open-source content available online in addition to digital courses such as Venture Capital 101: The Basics by Meagan Loyst on Maven.
- Community Organizations. Search for affinity groups to participate in based on geography, such as WISE (Women Investing in the Southeast), or your collegiate ties, such as through the Alumni Ventures network.
- Angel Networks. If you’re looking for access to new and exciting startups, or a community of like-minded investors to learn from, networks like Hustle Fund’s Angel Squad or 37 Angels offer individuals opportunities to invest in high quality deal flow through their networks of pre-screened startups.
By participating in one or more of these community forums, you can gain a broad perspective on the types of startup investment opportunities and develop your own personal investing style.
There’s no single path to investing in startups, but it’s now more accessible than ever to invest in this asset class. The more we share our experiences, recruit, and promote women check writers, the closer we get to closing the glaring gap of funding for women founders.
[Please consult your own legal (tax, investment, financial, etc.) advisers if you have questions or concerns about becoming an accredited investor or investing in this asset class.]
Allie Felix’s experience spans venture capital, business development, and community. She’s worked closely with innovators from students to top entrepreneurial leaders on special programming and content, high-impact events, curated partnerships and cultivating investor relationships. Allie has a passion for connecting people to resources and opportunities, and it is part of her mission to help Tampa Bay’s startup talent build bold, scalable and thriving companies.
