Turning Women Investors’ Risk Tolerance to Advantage

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On Thursday, March 24, 2016, we held our second monthly Hera Fund Wingpact Founder Funder Conversation. We featured Silvia Armitano Mah on the topic of “Busting the Myth of Risk Tolerance in the Female Investor.” Women angel investors are often accused of being “risk-averse” because of their perceived tendency to take longer to make an investment decision and write smaller checks. We wanted to bring this concern out into the open and have a constructive discussion for the benefit of the women’s ecosystem.

As you know, Silvia Mah is an active angel investor as well as Founder of Hera Labs and Hera Fund. In those roles she often advises women entrepreneurs on addressing potential investors’ perceived risks. She explains that entrepreneurs need to put themselves in the shoes of investors to understand how things look to them.

We know from financial industry research that women generally prefer to have a more complete understanding of investment opportunities before making a decision. The same research also shows that because of this, women investors reap better returns.

Silvia spoke about the plethora of new angel training options designed for women, including Pipeline Angels, 37 Angels, Female Funders, and the Rising Tide Fund. These learning opportunities will increase the comfort level of beginning women angel investors.

Silvia also commented on the many ways women are collaborating in early stage equity investing, and she believes these practices also increase the comfort level and effectiveness of women investors.

J.D. Davids, long-time entrepreneur and startup advisor, shared information about how to manage the risk of an investment after the check is already written. Insisting on regular reports covering milestones, financing plans, and current challenges not only benefits the company but gives the investor some impact on the long-term viability of her investment. Silvia agreed with this and noted that women investors need to feel comfortable asking for what they want and need from their CEOs. Silvia herself insists on being kept abreast of all happenings in her portfolio companies.

J.D. shared an idea that could help the women’s ecosystem fold in new investors effectively. Currently, a lot of angels invest through syndicates. In a syndicate, there is a lead investor who is a subject matter expert in the investee’s business. Other investors follow the lead, contributing their capital but are less involved in the company. While the lead takes the board seat, he or she does not necessarily have to bring as much personal money since he/she is bringing a number of investors. J.D. pointed out that there are plenty of successful women entrepreneurs who could be tapped to lead syndicates in their areas of expertise. This would give new women angels syndicate leaders, role models, learning opportunities, and would also get more women on boards. Here, a theme repeats that came up in our previous Hera Wingpact Conversation – perhaps we are moving in a direction of involving more women each with smaller individual investments.

The topic of transparency was a recurring theme in our conversation. Katya Grishina, a Hera Labs entrepreneur, spoke about the value of transparency on all sides of the table, and how the resulting trust in the relationship positively affects the company’s outcome. J.D.’s opinion is that that transparency seems to be easier to to achieve with female founders, in his experience. Mary Stovall of Google for Business expressed appreciation that the women’s ecosystem seems to support transparency, something that is personally very important to her. Silvia added that as an angel she embraces the value of transparency, letting entrepreneurs know up front when their industry is outside her expertise. We agreed that women angels’ (and probably all angels’) concern about risk understandably decreases as perceived transparency from the founder and team increases.

As a wrap-up, Audrey Kalman noted the importance of connection, to other women, as well as within the startup ecosystem. Everyone needs to round out their knowledge by collaborating with others with different expertise.

In summary, this short conversation raised a lot of constructive ideas for addressing the risk tolerance level of women investors. Ideas include:
– Entrepreneurs putting themselves in investors’ shoes
– Training and education geared toward women
– Women’s natural tendency toward collaboration
– Recruit rock-star entrepreneurial women to lead syndicates
– Encourage investors to ask for the information they need
– Practice transparency

For all the criticism women receive about their risk tolerance, at the end of the day we know that women’s desire for information and time for careful decision-making make them more successful investors. Their portfolio companies benefit, and so do their returns. Let’s be careful of criticizing women for their differences from men, especially when those differences are advantageous.

I believe the answer is not in trying to make women behave more like men. Rather, let’s innovate on existing business practices to take advantage of the qualities that women bring to early stage investing. Constructive conversations like these can address women’s unique values and concerns, and the entire ecosystem benefits.

Thank you to this session’s participants for authentically and transparently bringing their creative thinking to building an ecosystem that supports everyone’s success and satisfaction:

Silvia Armitano Mah, Founder Hera Labs and Hera Fund
J.D. Davids, Entrepreneur and Advisor
Katya Grishina, Entrepreneur
Audrey Kalman, Author, Editor, Marketing Consultant, and Doula
Mary Stovall, Google for Business
Suzanne Andrews, Founding Partner, Wingpact

Takeaway Actions:

Look for our next Hera Fund Wingpact Founder Funder Conversation on the 4th Thursday of April, April 28th at 4:00pm PT. The link to the conversation will be on the Hera Fund Facebook Events page. Next month’s topic is diversity in the women’s ecosystem – how to support all women entrepreneurs and investors in gaining access to the resources they need to be successful. We will be led by special guests Jackie Gutierrez, Founder and CEO of Cloud & Clover, and Lilibeth Gangas, Co-Founder of Somos ChangeMakers and Startup Digest Curator at TechStars.

If you would like to be on our email list to receive personal invitations to future Hera Fund Wingpact events, please send us a note through the Wingpact or Hera Fund websites.

Please consider supporting Wingpact’s crowdfunding campaign, to activate women investors and build the ecosystem.

Also watch for the next annual Hera Fund Venture Summit on September 17, 2016 at University of San Diego, with a keynote from Alicia Robb and Trish Costello.

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Also posted on the Wingpact blog, Soar Higher.

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This entry was posted in Best Practices, Hera Fund Wingpact Conversations, Inspiring Women, Vision and tagged , , , , , , , , , . Bookmark the permalink.

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