Anne Giles Clelland

Writing and Talking About Angel Investing

From two weeks of writing online about angel investing, and talking offline with others, I've observed that angel investing is a long-tail subject, i.e. of interest to a specific customer segment, or niche within the larger market.

In other words, a few are highly interested in, even impassioned about, the subject.  Many are not.  The readers of Handshake 2.0 are currently not, gauging traffic to the site when posts regarding angel investing are published.  Interestingly though, members of the larger market are already seeking the information in the posts through their use of Google.  For now, then, I've moved discussion of the subject here, to my CEO blog.

I responded to a comment with this:  "We have a convergence of start-ups and investors in a way that I have termed 'a culture of entrepreneurship born of consciousness rather than opportunism.'"

For those with plans for regional economic development, that convergence has been the result of painstaking strategy.  If all goes according to plan, that convergence will have economically explosive results. 

That will be news.

In the meantime, for those interested, I will compile insights and research in this blog's Angel Investing category and will continue to write a series of posts on angel investing. 

Here's the progression of my thinking and research so far, most recent first:

My Hometown's Women Angel Investors, 4/1/10

Angel Investor Guide to Blacksburg, Virginia, 3/31/10

Thinking Like an Angel Investor, 3/24/10

Angel Investor Comments on Becoming an Angel Investor, 3/23/10

Talking About Money, 3/22/10

Becoming an Angel Investor, 3/22/10

An Entrepreneur in Every Garage, 3/19/10

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Annie Johnson, writing for the Blue Ridge Business Journal, made an important contribution to the discussion of local angel investors in On a Quest for Capital, 3/22/10

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Added 4/21/10:  Handshake 2.0 still seems the right venue for some posts on angel investing. 

Ten Bottom Line Stats About Angel Investing, 4/20/10

Both that post and Angel Investor Guide to Blacksburg, Virginia are receiving interesting comments and I'm adding relevant links in the comment section as well.

Here's the link to the category with all the posts on Handshake 2.0: Angel Investing on Handshake 2.0.

My Hometown's Women Angel Investors

I may write a report with that title some day.  As far as I know, I can’t yet.  My hometown doesn’t have any women angel investors.

According to the Center for Venture Research (.pdf) in its March 31, 2010 report, in 2009 women angels represented 11.3% of the angel market.

Of 9 apparent angel investors in a hometown project, then, one would predict the list would include a female.

It doesn't.  And in preparing Handshake 2.0’s Angel Investor Guide to Blacksburg, Virginia, we didn’t find women angel investors on other lists, either.

What I don’t know is whether or not this is a problem.

An angel investor must be an accredited investor and meet several criteria, including a net worth of a $1 million or an individual annual income of $200K per year.  Women in my hometown qualify.

I see three possibilities.

1. Obstacles to opportunity prevent women from becoming angel investors.
2. Women are unaware of angel investing as an investment opportunity.
3. Women are aware of angel investing as an investment opportunity and choose not to participate.

One would be a a problem.  Two can be changed if merited.  Three represents a conscious choice.  I champion that.  So I am interested in possibilities one and two.

Why am I interested?  We're a corporation with a vision for regional economic development.  Current development initiatives are focused on entrepreneurship, particularly with regard to starting, mentoring and funding technology companies, primarily started by men, primarily funded by men.  I want to know that the small percentage of women angel investors (currently zero according to my research) is not a fundamental flaw in the big plan.

Does our region need women angel investors to grow?  If any angel investor will do, man or woman, I've got other sizzling subjects to think and write about.  If we do need women angel investors, then let's remove any obstacles that exist and let women know about angel investing.  If they choose to participate, let's create a hometown in which their deals can thrive.

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From Angel Investing Needs More Than Just a Few Good Women on the Kauffman Foundation 2006 report Women and Angel Investing: An Untapped Pool of Equity for Entrepreneurs(.pdf):

The report notes that the total number of women angel investors is smaller than women's collective wealth, education, and experience suggests is possible and calls the shortage of women angels "as a missed opportunity for women, for the entrepreneurial community, and U.S. competitiveness as a whole..."

"Angel capital, whether invested through organized angel groups or by wealthy individuals acting independently, is essential to entrepreneurial start-up activity in the United States," said Carl Schramm, President and CEO of the Kauffman Foundation. "Considering that women's financial power and wealth has grown in the past 20 years -approaching half of the nation's net worth - it appears women are under-represented in this type of investing and that we are missing an opportunity for new investments and perspectives. The gap between the potential and actual participation of women as angel investors raises important questions that need to be addressed."

From the Center for Venture Research (.pdf) March 31, 2010 report:

Women-owned ventures accounted for 21% of the entrepreneurs that are seeking angel capital and 9.4% of these women entrepreneurs received angel investment in 2009. Both the number of women seeking angel capital and the percentage that receives angel investments are low compared to the overall market. These data indicate that when women do seek angel capital they lag behind the market yield rate by 5%.

From Confidence and Angel Investors: Does Gender Matter?, 2008:

We investigate whether men and women angel investors have different levels of confidence based on participation in the angel capital market, rate of investments, and stage of investments. We find evidence consistent with women angels having lower levels of confidence compared to men, although we do not suggest that this difference is deleterious for women angel investor's wealth. However, women entrepreneurs, who disproportionately seek funding from women angels, may have more restricted access to early-stage capital than men.

Talking About Money

Wealth - any income that is at least one hundred dollars more a year than the income of one's wife's sister's husband.
- H. L. Mencken

Some folks rail against other folks, because other folks have what some folks would be glad of.
- Henry Fielding

Money is power, freedom, a cushion, the root of all evil, the sum of blessings.
- Carl Sandburg

I was taught it’s impolite to talk about money.  The goal of that social norm is probably less about preserving social harmony than about avoiding the discord of social hierarchy.  When how much money you have and how much money I have are secret, we can co-exist as equals.  But when I learn you have more than I do, or vice versa, an overt hierarchy is born.  Comparatively, perhaps becoming competitively, one of is one-up.  The other is one-down.

I have written and spoken openly of my desire for my company to be a contributor to regional economic development and was even called out to specify my vision.  Part of that vision includes fostering an entrepreneurial culture. 

With the growth of an entrepreneurial culture rich with ideas and companies comes the need for investors to grow start-ups into enterprises.  While secrecy is often the norm in networks of investors, someone knows who’s in, and some declare themselves openly.

Annie Johnson, writing for the Blue Ridge Business Journal in On a Quest for Capital, details the context of the state of angel investment and venture capital investment in central and southwest Virginia.  Several investors she interviews share the terms of the deals they've done. 

To that we add this data on Handshake 2.0: To be an accredited angel investor, one requirement can be that an individual has a net worth of one million dollars.

As of the last census, according to the U.S. Census Bureau, 43% of household incomes in Blacksburg, Virginia were below the poverty line.

A few up.  A lot down.

It’s time to talk about money.

May the risk to our social harmony from outing our social hierarchy be worth the reward.