Women Entrepreneurs Seek Angel Investment at Lower Rates Than Men But Have An Equal Probability of Getting It
3 min read · Dec 2024
Becker-Blease, John R., and Jeffrey E. Sohl (2007)
Women-owned businesses submit between 5% and 10% of proposals to angel investors compared to 90% to 95% by men-owned businesses.
Summary
This study examines women's access to angel capital. While other research has explored disparities in access to debt and venture capital, comparatively little was known about angel capital among women at the time of the study. Women entrepreneurs face significant barriers to accessing angel capital, and they are less likely to seek funding compared to male entrepreneurs. However, when women entrepreneurs seek funding, they are as likely to receive it as men. This suggests that the significant barrier is the lower rate at which women seek angel capital, owing to factors such as social networks, a lower number of women angel investors, and the tendency for both male and female investors to favour investments from entrepreneurs of the same gender.
Method
This quantitative study uses a survey sent to US angel portals annually from 2000 to 2004 to examine gender disparities in angel investment. The survey collected data on the number of applications from men and women-owned businesses, the funding success rates, and the proportion of equity surrendered by funded ventures. The authors use regression techniques to identify differences in funding outcomes between male and female-owned businesses.
Key Findings
Women and men seek angel funding at unequal rates.
Women-owned businesses submit 5-10% of proposals to angel investors.
Men represent the overwhelming majority of angel capital seekers, at around 90% to 95%.
However, women and men succeed in obtaining angel funding at roughly the same rates.
The funding success rate for men (14%) is slightly higher than for women (13%), but this difference is statistically indistinguishable.
Women do not surrender more equity ownership in exchange for investment dollars than male entrepreneurs.
Women prefer seeking capital from female angel investors; likewise, men prefer seeking capital from male angel investors.
Takeaways
This study shows that women-owned businesses can succeed in raising money from angels at the same rate as men. Thus, encouraging more women to seek funding from angels could increase the number of women-owned businesses in the start-up ecosystem. Similarly, since women seem to prefer women angels to men, improving women's representation among angel investors could increase the rate at which women seek capital.
However, the findings need to be approached with careful consideration. For example, the study overlooks the fact that women seeking angel capital often represent a uniquely motivated, qualified, and successful subset - that might be different than the pool of male entrepreneurs. If this is true, these women should get higher, not equal, rates of funding than men. This discrepancy highlights systemic barriers that may discourage women from even entering the ecosystem.
The core issue is not whether some women succeed in raising money from angels, but the higher barrier to entry and the different standards to which women are held. Pathways that make it easier for women to access angel networks and feel comfortable submitting proposals are key drivers for change. Additionally, ensuring angel investors are aware of their biases can support the ecosystem to become more inclusive and encourage more women off the sidelines.
References
Becker-Blease, John R., and Jeffrey E. Sohl. 2007. “Do Women-Owned Businesses Have Equal Access to Angel Capital?” Journal of Business Venturing 22(4): 503–21.
About WIN-VC Canada:
New Power Labs is the research lead of the Women and Nonbinary (W) Impact (I) Network (N) for Venture Capital (VC), a national collaborative of organizations working to provide services, programming, events, and dedicated resources to women and non-binary entrepreneurs and gender lens investors across Canada who are working towards becoming investment ready and increasing the pool of investors driven to invest in these ventures.
This research is part of WIN-VC Canada, supported by the Government of Canada. WIN-VC acknowledges the support of Innovation, Science and Economic Development (ISED). ISED has awarded funding for WIN-VC that will make the venture capital environment more inclusive for women by transforming traditional investment processes, processes and knowledge into respectful and meaningful approaches that value equity and impact with a focus on diverse women and non-binary entrepreneurs and SMEs including Black communities, Indigenous peoples, racialized populations, persons with a disability, 2SLGBTQ2+ and new Canadians.
