Dearth of angel capital for women explored

Even though women-owned businesses make up the fastest-growing sector of new venture ownership in the United States, they continue to receive less funding from angel investors than do their male counterparts, according to an article co-written by the director of the University of New Hampshire’s Center for Venture Research.

The findings by Jeffrey Sohl, director of the center, and John Becker-Blease, professor of Washington State University, are discussed in an article they co-wrote, “Do Women-Owned Businesses Have Equal Access to Angel Capital?” that appears in the July issue of the Journal of Business Venturing.

According to their research, only 8.9 percent of angel investment proposals are brought forth by women business-owners. Yield rate of angel investment in female- and male-owned businesses, however, are nearly equal, at 13.33 percent and 14.79 percent, respectively.

A tendency toward seeking angel funding from same-sex investors in a market heavily weighted by men could be in part responsible for the difference in funding request rate between men and women, the authors argue.

The number of women investors with the expertise and experience necessary to be effective providers of angel capital and perceived barriers to quality investment opportunities on the part of would-be female angel investors are both possible reasons behind the low number of women choosing to participate in angel investing.

“Our evidence suggests that women-owned businesses and male-owned businesses must surrender relatively similar amounts of equity in return for investment,” the researchers said. “However, more detailed deal-level data could allow this question to be examined more thoroughly and also provide insights into whether and how proposals from women-owned businesses and male-owned businesses differ.”

It’s also possible, according to Sohl and Becker-Blease, that a larger number of women are participating in the angel market than their research suggests, but they are doing so outside of organized angel groups.

The recent research demonstrates the importance of finding ways to increase the number of women investors willing to participate in early-stage financing, they say. – TRACIE STONE

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