Katherine Hague knows the power of angel investing for an early-stage startup.
The founder of Toronto-based ShopLocket, an online sales platform for hardware startups, says a $10,000 commitment from angel investor Heather Payne, founder of HackerYou, helped launch her company in 2011. Hague later secured $1 million in funding, and then — at the age of 23 — sold ShopLocket for an undisclosed amount to Irish design company PCH International.
Now, Hague is bringing that experience to her latest project, Female Funders, a site dedicated to providing women with “approachable” resources to help them jump into angel investing. Its goal is to encourage 1,000 women to invest in their first venture this year.
With Female Funders, Hague is hoping to help female entrepreneurs overcome one of their biggest challenges: getting funding. While there are a number of female-focused incubators and financing programs to help women pursue their startup dreams, Hague appears to be part of a recent movement urging more women to get on the other side of the table — to become investors themselves.
The hope in initiatives like Female Funders is that, one day, there won’t be a need for programs tailored just to women because the landscape won’t be dominated by men anymore.
“I’ve started making a few angel investments myself, investing in four companies to date,” Hague said. “In doing that I’ve started talking to a number of women about angel investments and generally the response was, ‘Oh that’s so interesting I’d love to do that, but it’s not really for me.’”
Women currently lead the way in launching startups, yet attracting venture capital remains a challenge in North America.
In Canada, 62 per cent of startups were launched by women in the past year, a survey released in May by Sage North America reported. But between 2011 and 2013, 85 per cent of the 6,793 U.S. businesses funded by venture capital had no women on the executive team, a study by Wellesley, Mass.-based Babson College found. Only 2.7 per cent had a female CEO.
Hague said increasing the number of women angel investors will help change these statistics.
“The primary reason women receive a lot less than male-led ventures is due to similarity bias,” said Hague, who now works as vice-president of community engagement and hackathons at PCH. “I think the vast majority of venture capitalists are male, and we tend to invest in, or find more approachable, people like us.
“I think that just naturally, by getting more women on the other side of the table, more women writing cheques, we’ll see more women getting funded.”
The Female Funders website features interviews with women who have experience in angel investing, reading lists, a six-week online course and other resources that shed light on some of the benefits, as well as misconceptions, first-time angels may have.
“Everyone invests for different reasons, but as an angel investor I think your primary motivation is not financial,” Hague said.
“Just talking to a number of women who have been out of the workforce since they had children, or trying to switch industries, an angel investment for them was a way to network, get up to speed on things happening in the industry and also spark new interests.”
One of the hurdles women face in becoming an investor is the size of investments.
“Many people are trying to convince women to become angel investors and put in $50,000 or $100,000 here and there, and it’s been challenging to get women to show up to that model,” said Vicki Saunders, head of SheEO, a Toronto-based group that supports women-led ventures.
In July, SheEO started an initiative to turn that idea on its head: Radical Generosity called on 1,000 professional women to contribute $1,000 to create a $1-million pot that will fund 10 female-led ventures. “I thought, what would fit better with women’s risk profile? So we came up with this idea of $1,000 from 1,000 women, and going on a journey together to help other women.”
The businesses receive the funds as a no-interest loan for five years, in addition to a one-year support program. The competition will force the female entrepreneurs to collectively decide how to divide the $1 million — meaning they will go through each other’s budgets, line by line, and have to state why they need that money. The two rules are they can’t give all the money to one venture, and it cannot be divided equally.
This will help them better understand the lens of an investor, and take them out of their comfort zone, Saunders said. “To stand up for themselves and say why I need this $100,000 — it’s a thing you have to do all the time as an entrepreneur seeking outside financing,” she said. “But women tend to have a harder time negotiating.”
On both sides of such programs — women starting ventures, and women who are jumping into investor roles — there is a desire to continue the growth of female entrepreneurship that has boomed in Canada in recent years.
Programs focused on female entrepreneurs such as one offered by MasterCard in partnership with Ryerson University’s DMZ business incubator, aim to highlight successes of female-led startups and create a community for them.
“I feel like these entrepreneurship programs for women have some parallel qualities, it’s definitely helpful,” said Lily Tse, founder of the Think Dirty beauty and cosmetics app, and one of six startups that received $5,000 and a placement at the DMZ from the MasterCard Women in Entrepreneurship program.
“Anything that increases the visibility of women, that shows there’s a bunch of us doing this, it’s inspiring to other women. That’s the biggest takeaway — to have more role models.”
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Article source: http://business.financialpost.com/entrepreneur/growth-strategies/how-female-entrepreneurs-hope-to-spark-a-new-wave-of-women-led-ventures