The angel-investing world is now 40% women
Angel investors often write the first check to nascent companies, even for founders who have savings or raise some money from friends and family. Angel funding can make or break an entrepreneur’s ability to get to the next level — finish a product, hire a salesperson or make another important investment.
In 2022, women angels accounted for just under 40% of the angel market, according to a report by Jeffrey Sohl at the Center for Venture Research at the University of New Hampshire, which has been tracking the industry for more than 40 years. That marks an increase from 2021, when women angels accounted for just one-third of the market.
The growth was reflected in the number of women-owned companies looking for capital from angel investors, the study found. In 2022, 37.1% of entrepreneurs seeking angel funding were women, up from 28.6% a year earlier.
The change comes amid a difficult fundraising environment. Startups raised $55 billion from investors in 2021, according to data from research firm CB Insights, but only half that in 2022. Early-stage companies were not immune from the downturn: In the second quarter of this year, for example, the average amount raised by seed-stage companies dropped by 13% compared with the same quarter last year.
Still, women shaped by a decadelong tech boom seemed undeterred from striking out on their own with companies that were enticing to funders.
Investors put their money into a greater number of potential companies than they had previously, the study found. About a quarter of women who sought angel funding got it in 2022, compared with just under 20% in 2021.
“This high percentage … indicates that there were more women-led deals, and these deals were of a higher quality, both encouraging trends for women entrepreneurs,” Sohl wrote.
The founders’ ambitions were matched by a major financial change among women who had built careers on Wall Street and in other high-paying industries and were ready to make investments with their own capital, said Loretta McCarthy, co-CEO and managing partner of Golden Seeds, an investor consortium that allocates angel funding to women-run businesses.
“The most recent batch of women [in the consortium] are people who have made their own money and made enough to be able to do this kind of investing in a risky asset class,” she said.
In 2004, when Golden Seeds kicked off, few women were raising funding, even though they were starting around one-quarter of companies. The collective now has eight chapters, and New York is its largest, with 250 companies funded. Other groups of angels investing in women have followed suit, McCarthy said.
As to why women angels make good funders of women-led businesses, McCarthy explained that the data shows that personal relationships matter a lot in early-stage funding deals.
“For a long time, the world of investors was men investing in men,” she said. “It’s a personal thing — they are pulling out a personal checkbook to write the checks, and they want to form a bond, help grow the business or serve on the board.