Can Crowdfunding Create More Female Angels?

First the good news. Increasing numbers of women are starting businesses in the United Kingdom. Last year, the government-commissioned Rose Review found that 150,000 companies were started by women in 2022, twice the number recorded in 2018.

And the bad news? Well, female-led businesses with growth ambitions still find it harder to raise equity finance. According to the Female Founders Forum, only 3.5% of Venture Capital went to British businesses led by women in the first half of 23, compared with 85% directed to male-led firms. The Funding inequality was also recognised by the Rose Review. One recommendation was a drive to encourage more angel investment by women.

The question is, what can be done about it?

British entrepreneur Emma Sinclair MBE has come up with her own solution. Almost two decades ago – in 2005, to be precise – she floated her company, Mission Capital on the London Stock Exchange’s Alternative Investment Market. In 2014, she co-founded EnterpriseAlumni – essentially a platform designed to help corporations manage and engage their alumni and retirees. It raised Series A funding in 2022.

And today, Sinclair is on a mission to encourage more women to become angel investors. Working in partnership with U.K.-based crowdfunding platform, Crowdcube, she is inviting women to invest relatively small amounts in startup and scaleup companies. Over the coming months, there will be opportunities to invest not only in EnterpriseAlumni but also in twelve other businesses led by female entrepreneurs. The initiative – dubbed Be My Angel – will launch officially on International Women’s Day.

Bottom Up Solution

Speaking to me on a video link, Sinclair says the underfunding of female-led businesses is a problem that has to be solved from the bottom up. In the rarified world of VC funds, it would obviously make a difference to have more women as partners, listening to and deciding on pitches. Similarly, Sinclair believes there should be more female angels. That’s what she’s setting out to encourage.

“There is a perception that being an angel investor is only for the rich,” she says. “In fact, anyone can be an angel.”

The logic is, that every one of us – male and female – can save into pension funds or make a conscious point of buying products from businesses expressing values that align with our own. There is no reason why some of our disposable income shouldn’t go into startup and scaleup companies. The problem, she says, is that there are only limited opportunities for those who can only invest £500 or £1,000.

One option that has long been open is investment through equity crowdfunding platforms. The difference here is that the investment process – albeit in collaboration with Crowdcube – will be directed at selected female-owned companies. Initially, investors will be invited to back Sinclair’s own company, but other opportunities will follow. Sinclair says twelve entrepreneurs have so far signed up for the scheme and These include Dr Zara Nanu, Hephzi Pemberton and Anna Berkley, female founders drawn from a diverse array of sectors.

The idea is that each company will have a crowdfunding round. When that finishes the small investors will be informed of the next opportunity. The hope is to encourage women to become active angels.

But is this is this just an eyecatching way to attract investment? Well, Sinclair has a track record in advocating for gender-balanced-investment and has spoken and written widely on the subject for a number of years.

The Importance Of Angels

But will this help solve the funding problem? Sinclair stresses that despite being eclipsed in terms of profile and perception by high-investing VCs, angels remain an important source of funding. “I have a lot of friends who run B2B companies,” she says. “Most are backed by angel finance.”

Angels usually can’t match the sums invested by VCs but they offer a value-add. “I want people around me who can not only back me but also support me,” Sinclair says. And because angels are often business owners themselves, they bring a wealth of experience.

That won’t necessarily apply to those coming to angel investing through a crowdfunding model, but what they can do is fill in the funding gaps. “There are only about 35,000 angels in the U.K., “ says Sinclair. “If we could raise that by, say, 100,000 it could make a difference.” Equally important, the Be My Angel scheme is specifically encouraging women to invest in women.

So what is the motivation for this? Sinclair says she has raised money for EnterpriseAlumni from VC funds, high-net-worths and angels. She still feels, however, that as a woman – statistically at least – the odds are stacked against her. “I know that if I send my CFO or CMO into a pitch meeting, he is 50% more likely to come away with money.”

The systemic issues have been well-documented. The VC space is male-dominated and investors like to back people who look and sound like them. There can be conscious and unconscious bias and women tend to be asked different questions. “Men are asked about their growth plans, their aspirations and their hopes and dreams. These are market promotion questions. Women tend to be asked prevention questions,” she says.

So, rather than constantly discussing this, Sinclair says she wants to do something.

The Wider Campaign

There is, of course, a bigger picture. In January, Small Business Britain published a list of 100 Inspiring Female Founders as part of an ongoing drive to support women in business. Citing the Rose Report, the organization welcomed the upturn in female entrepreneurship. And while its own research suggested that 39% set up companies with the goal of achieving better work-life balance (with 86% achieving that) funding remains an issue.

Support Networks

“It is no secret that access to finance is a barrier for all small businesses, and women can face particular challenges here. There is certainly a need to ensure female founders have greater access to finance, and included within this is growing greater awareness of potential funding options out there. Often, we hear of women dipping into their own savings, or not seeking out external funding at all, says Small Business Britain CEO Michelle Ovens.

But it’s a multi-layered task. “There is certainly a need for the business support landscape to step up – across the private and public sector – and look at ways to improve financing for female founders. This isn’t just about the funding on offer though -although that is a big part -but thinking about broader support to help small businesses to grow and scale. This needs to be a common goal across the small business support ecosystem,” Ovens adds.

There is undoubtedly a problem that needs to be addressed. The Rose Report estimated that £250 billion in new value could be unlocked if women were able to scale their businesses at the same rate of men. Among the review’s recommendations was a drive to grow the pool of women angels from 14% to 30%, through the Women Angel Investment Taskforce and a Women Backing Women campaign. Sinclair’s campaign is part of that bigger picture.