Study Finds More Female Angels Equals Bigger Investments
BY Courtney Rubin
When an angel investor group has more than 10 percent women, the number or size of investments increases, says new research.
Looking for angel investors? Female angel investors are less risk-averse than previously believed, says a new report.
Researchers at the University of New Hampshire found that angel-investing groups composed of higher numbers of women made more or bigger investments than those with fewer women. The magic number for increased investments: upwards of 10 percent women.
"At first the results were counterintuitive, since previous research on women investing, in general, shows women to be more cautious investors," said Jeffrey Sohl, the study's co-author and director of the University of New Hampshire Center for Venture Research. "Since angel investing involves substantial risk, one would assume that this cautious behavior would also be exhibited in angel investors."
Sohl—who analyzed data from 183 angel investment groups—hypothesizes that when there are few women in the group, they may be responding to "stereotype threat," meaning that people will live up to a stereotype when they’re in a situation that highlights it.
In the context of this research, this means that when there are few women in an angel group, "the stereotype of cautious investing is accentuated," Sohl said. "As the number of women increases, there is less of a stereotype—there are more women so they are more recognized for their ability as investors and less because of their gender."
Should angel groups be making an effort to create an environment that reduces stereotype threat?
John Becker-Blease, an assistant professor of finance at Oregon State University, says that’s a complex question. "Is it really our goal to get women to behave like men?" he asked Oregon’s Democrat-Herald. He points out a stock-trading study which found that women actually trade more rationally than men.
"It might be that the angel groups with about 10 percent of [female] investors are getting it right," he said.
The percentage of female angel investors has remained fairly constant over the last five years, at 15 percent. There has been a rise in the number of women-owned businesses presenting to angels, though. The figure was at 13 percent in 2006 and hit 20 percent in 2009 and 2010.
Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.