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Dec 20

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Women investors far from risk averse

Women investors are under-represented in private equity investment and folks are starting to notice. This month the Harvard Business Review posted an article by Sarah Granger about women in angel investing. She notes that there are a number of groups and organizations devoted to getting women more involved. She discusses Pipeline, Golden Seeds, Astia, 500 Startups that are all either entirely focused on women investing and advising or are well-balanced in their gender diversity. That’s great, but it’s rather sad when an organization is newsworthy because they are gender diverse.

The fact is that very few investing/advising groups are gender diverse. This is true in VC firms and also among angel investors playing with their own cash. The Kauffman Foundation has put together a white paper about all about it.

One explanation that I’ve heard many times is that women are too risk averse for private equity and this is why we don’t see more of them in the high tension world we sometimes call “risk capital”. A recent US Trust study of ultra-high net worth individuals found that women are 5% more likely to report feeling nervous while making investment decisions and 8% less likely to feel smart.

Yet, I’m comfortable arguing that risk aversion is not the problem here.

I manage an angel group and I’m a woman. I’ll be the first one to tell you that I get lonely sometimes in investor meetings when I realize that I haven’t seen a woman across the table in what feels like months. I too, have wondered why we don’t have 50% or even 25% women in investor meetings.

At Rockies Venture Club, we have 209 self-identified investors (both angels and VC fund managers) on our mailing list. Only 19 of those are women. A whopping 9% of our investor group is female. Come on ladies, I’m dying out here!

There has been plenty of research that identifies women as wealth holders in the US. In 2005 women held $14 trillion, which was 51.3% of the wealth in the US. By 2007 the value had risen to $19 trillion. Maybe women really are afraid to lose that capital in high-risk early stage investments.

I still don’t think so.

Let me tell you a little about Rockies Venture Club Investor Forum. We are very friendly to the uninitiated accredited investor. In 2012, we did not charge investors a cent to attend meetings, and we don’t require a minimum investment. There is very little barrier to entry to get involved with our group. For a year now, we have had flexible rules to help neophyte investors meet and make friends with experienced investors. In general, the investors who come to the table have made an investment within 6 months. Not ALL of them, mind you. Some are still learning, absorbing, and waiting for their interest to be piqued enough to write the check. But most.

If women are risk averse, then I would expect the women on our list to attend investor meetings and absorb, learn, and wait.

But what really happens is a very different story. RVC women investors don’t behave like you’d expect risk averse people to behave. They invest. Often quickly.

Of the 206 current investors on our mailing list, 44 have attended an investor meeting since August. Eight of those attendees were women. Let me put a finer point on it. I’m saying that over 40% of the women who self-identify as investors on our mailing list physically show up at meetings. The male show-up-rating is only 19%.

It goes farther than that. More than 20% of the women on my list aren’t just showing up to meetings. I know they are ponying up the cash when it comes time to close a round. I don’t have final numbers for the men yet, but using a non-scientific mental survey, I’ll hazard a guess that it’s also around 20%. Roughly, the same percentage of our male and female investors are cutting checks.

Now we aren’t talking about chump change here. Rockies Venture Club Investors have invested at least $6 million this year making us one of the most active angel groups in the country. Final numbers are still coming in and final investments are still closing so the total for 2012 will likely rise closer to $7 or 8 million. Further, we’ve leveraged those dollars so the closed-deal-tally is more than $14.6 million invested in RVC companies this year.

The real difference between the men and women in our group lies in engagement. There are 187 male investors and only 19 female investors who are involved in RVC deeply enough to identify themselves as investors. How many accredited women are on my list who haven’t checked the investor box identifying them (privately) as an investor? Why haven’t they done so?

Frankly, we don’t have enough information to answer that question. They might not know they are legally accredited investors [accreditation means you had an income of $200K last year ($300K if married) and expectations for the same this year OR $1M in assets not including your home].

Some women may choose to invest in a more traditional, public portfolio. Maybe they follow the instructions laid out by their wealth managers who are not allowed to suggest private equity (it’s called ‘selling away’ and it puts wealth managers’ careers at risk). Or perhaps they are giving a substantial amount to non-profit charities for a tax break each year. Maybe fewer women have been involved with start-ups, small business, and fundraising and therefore aren’t even aware of the opportunities of angel investing. I will mention, as a caveat, that some women invest as part of a couple and send their husbands to investor meetings. These women are not being counted in my data since I never see their names on meeting rosters or their faces in the meetings.

One thing is for sure, the women in our group are just as likely to invest at the men. The old standby explanation of risk aversion is simply not describing this scenario. I think it’s time to look deeper to see why women are not engaging in angel communities and private equity at ratios equal to men.

At RVC, we cannot passively allow our investor groups to remain unbalanced. Women make 85% of the purchasing decisions in the US. This accounts for $3.7 trillion in consumer spending and $1.5 trillion in business spending. We run the risk of a disconnect when one demographic is so heavily involved with product purchasing and so uninvolved with the formative years of company development.

To begin balancing the gender scales we have created our own women’s group to invite the female side of our membership to get involved with private equity investing and mentoring. We encourage all accredited investors (even newbees!) to attend an investor meeting and see what we do there. In 2013, we are adding extensive educational content for investors and entrepreneurs to get savvy with private equity investing.

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Permanent link to this article: http://www.rockiesventureclub.org/2012/12/women-investors-not-risk-averse/