Sarah Endline asked Golden Seeds, a group of mostly women angel investors, to help contribute $1.5 million to expand her candy company. She sweetened her pitch with samples of dark cacao pieces, about a calorie each.
Endline, who got her MBA from Harvard Business School and worked at Yahoo! Inc in marketing before launching sweetriot in 2005, has already received about $1.5 million from the group, and other investors, in 2007. Turning to Golden Seeds yesterday again was a natural choice, said Endline, 39, because “we’re a women-powered, women-certified company whose core consumers are women.”
Golden Seeds, based in New York, is one of the largest angel groups in the country and is focused on supporting companies led by women. The group is helping to add more women to the ranks of investors in startups. That’s key to helping female entrepreneurs since six years of survey data on angel investing found that women entrepreneurs were more likely to seek funding from groups with a higher number of female investors, said Jeffrey Sohl, professor of entrepreneurship and director of the Center for Venture Research at the University of New Hampshire in Durham.
Thirteen per cent of women entrepreneurs who asked for money from angel investors received it in 2010 compared to an overall rate of 18.4 per cent, based on data from the Center for Venture Research.
WOMEN ANGELS
“Many women entrepreneurs trying to get financing from a small number of women angels results in a lower success rate,” said Sohl, referring to funding. “One of the goals is to get more women angels.”
There are nine US women-focused groups of angel investors, who generally invest their own money in early stage companies, said Marianne Hudson, executive director of the Overland Park, Kansas-based Angel Capital Association, an industry trade organization with 162 member groups. Angels are different from venture capitalists, who tend to manage a pool of investors’ money and give larger amounts to more established companies, Hudson said.
There were 265,400 angel investors in 2010 and they put $20.1 billion in 61,900 entrepreneurial ventures in the US, the Center for Venture Research said. Women represented about 13 per cent of angel investors and female entrepreneurs accounted for 21 per cent of those seeking angel capital.
Some of the companies that Golden Seeds backs offered products that target and understand women, which was a prudent investment strategy, said Deborah Jackson, who worked at Goldman Sachs Group Inc from 1980 to 1990 as a vice president and joined Golden Seeds in 2009. Sweetriot, Endline’s company, creates fair trade, organic chocolates in bite-sized portions.
LACK OF ACCESS
Another company seeking funding at yesterday’s forum, held in midtown Manhattan, is a platform for personal clothing stylists, fronted by Stacy London, who co-hosts the television show, “What Not to Wear” on the TLC network.
Women control 73 per cent of household spending, according to a Joint Economic Committee report released in December by Representative Carolyn Maloney, a New York Democrat. Women’s earnings will recover faster than men’s as the economy rebounds, which means companies that market to females may perform well, said a Bank of America Corp December research note to clients.
One of the major barriers for women CEOs of startups was lack of access to the networks that led to funding, said Amy Millman, cofounder and president of Washington-based Springboard Enterprises, which has helped 445 female-led companies connect with angel, venture and corporate investors to raise about $5.5 billion in equity financing over the last 11 years.
FINDING CAPITAL
“It’s very difficult for any entrepreneur to get capital and it’s even harder for women,” said Stephanie Hanbury-Brown, 54, who worked at JPMorgan Chase & Co for 15 years, most recently as head of e-commerce before starting Golden Seeds in 2004. Serving on JPMorgan’s diversity steering committee made Hanbury-Brown realize the culture of large companies wasn’t going to change and having more companies run by women was what would help lead to more gender equality in the workplace, she said.
Golden Seeds has about 180 active members who invest directly in startups having at least one woman in a top executive-level position with equity in the company. Active members may also assist the startup company by mentoring the CEO or serving on the company’s board. Since 2005, the group has invested more than $22 million in 36 different firms. There were also about 50 passive investors who put money in a fund created in 2008 that invested in 16 companies.
SECOND FUND STARTING
A second fund is currently raising up to $25 million and is open to accredited investors through the end of the year. Investors must be accredited to participate in Golden Seeds, which means they must have a net worth of at least $1 million excluding primary residence or $200,000 in annual income. Members are required to invest at least $25,000 in one deal a year. Passive investors must put at least $250,000 in the fund and active investors must invest at least $100,000, Hanbury- Brown said.
