Posted by Guest Contributor
Guest post by Kiki Tidwell, Northwest Energy Angels
Angel investing has been, for the most part, a male dominated arena. It is a highly risky, but potentially lucrative investment activity and may appeal more to the risk appetites of testosterone-fueled males; high risk, high reward, large bragging rights. It is that same appeal to the internal compass of a male that gets him to step up to the plate in a stadium full of spectators believing that he is bound to hit a home run, when the odds are against him. Women may not crave the spotlight of big wins, but they may actually be more capable of achieving them in angel investing than the average male. Continuously, research is uncovering that women are genetically hard-wired in certain ways because of their gender and that they also have distinctly different decision-making processes than men. When one looks at the traits needed to be a successful angel investor, abilities attributed more commonly to women, such as relationship building, detailed due diligence work, and information sharing are often mentioned as the skills for success.
Do women have better B.S. meters? In the book, The Female Brain, Dr. Louann Brizendine states, “ New brain science has rapidly transformed our view of basic neurological differences between men and women. (p4) … Girls do not experience the testosterone surge in utero that shrinks the centers for communication, observation, and processing of emotion (in males), so their potential to develop skills in these areas are better at birth than boys’ (p15) … a girl (is) born with such a highly tuned machine for reading faces, hearing emotional tones in voices, and responding to unspoken cues in others.” (p21) So, yes, it appears that the female starts hard-wired from birth with a better ability to read an entrepreneur’s character, honesty, and leadership skills.
Historically women have depended on connection for survival and so may have also evolved an ability to work better with others. Books such as Fool’s Gold: The Truth Behind Angel Investing in America by Scott Shane tell us that successful angels are usually found banding together in angel groups with other angels to share information and expertise. Women, in general, have little problem admitting that they do not know something and asking for advice. They are also more than willing to share lessons learned, while as men may be oriented more to keeping their cards close to their chest in the fear of giving away some competitive advantage. A woman generally wants everyone to do well with a “we’re all in this together” mindset. A start-up company may benefit from this female win-win orientation in contrast to a situation where investors’ interests are pitted against entrepreneurs’.
A recent report from The National Council for Research on Women (NCRW) notes, “According to research published in 2002 in the International Journal of Bank Marketing, women process investment-related information more comprehensively than men in the same context. Women in the study tended to take into account a greater level of decision-making detail, whereas men were more likely to simplify data and make decisions based on the overall message or schema of the investment. Women tended to consider information that was contradictory or that did not confirm an initial decision. By comparison, men in the study tended to ignore such information and process only information that confirmed the initial decision.” (p 9)
One of the keys to being a successful angel is to put in the time and effort in extensive due diligence on a prospective company, in addition to being highly selective, to heed red flags, even if you really, really like the concept or management team. It is not uncommon for experienced angels to only invest in one company out of a hundred evaluated deals. The National Council for Research on Women NCRW reportquotes Glenda Stone, co-chair of the U.K. Women’s Enterprise Taskforce, “(As) investors, women do 60 percent more work than men before making a decision.” Women are willing to do the homework before an investment, but tend to be more patient capital after they have invested, maybe because they are more confident of their investment decision.
The report goes on to say, “According to a 2008 paper by Elsa Ermer, Leda Cosmides and John Tooby of the University of California, Santa Barbara, men who feel they are being observed and judged by their peers – men of equal status to themselves – tend to make riskier choices at times of loss or pressure in order to assert their dominance over potential rivals, even when the outcomes of less risky choices would achieve the same financial or resource outcomes. Women, on the other hand, did not choose the riskier path when observed by their peers, but tended to bring more consistent decision-making patterns to all situations.” Who would you want on your board?
This is but a small beginning on a thesis that women make better angel investors. But, as more information is accumulated on what makes an angel successful and as angels become more professional in tracking their returns, keep your eye on the women. Or invest with them.
Kiki Tidwell is a cleantech angel investor in Seattle and President of the Tidwell Idaho Foundation, a small family foundation she started after considerable thought about inherited wealth when her daughter was born. Individually, Tidwell is a Limited Partner in several venture funds: Nth Power Fund IV, CalCEF Angel Fund, Good Capital’s Social Enterprise Expansion Fund, TrueBridge Capital Fund II, and Aligned Partners. Since 2007, she has been a member of Northwest Energy Angels, a cleantech-focused angel group, and served two years on its board. She was also an adviser to the Fall 2012 Astia Global Entrepreneur Program.
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