Investing in Her: More Women Putting Money Into Women's Businesses
We are embarking on the “Age of Female Entrepreneurialism” in this country.
That profound optimism is owned by Sallie Krawcheck, CEO and co-founder of Ellevest, a digital investment platform for women, and Ellevate Network, a global professional women’s organization of more than 34,000 members.
Speaking at a recent gathering in New Jersey for this year’s Top 25 Leading Women Entrepreneurs, Krawcheck, who is December’s Virtual Happy Hour guest at Take The Lead December 14, said women have the money, access and knowledge to truly change the nature of investing, innovation and business.
“According to Krawcheck, women today solely control $5 trillion worth of investable assets. Women jointly control with their spouses and partners another $6 trillion. And, over the next couple of decades, women will inherit another 70 percent of the $40 trillion of wealth transfer from their deceased parents and spouses,” writes Meg Fry in New Jersey Business,.
Krawcheck, who is “the chair of the Pax Ellevate Global Woman’s Index Fund, the first broadly diversified mutual fund that invests in companies that rank among the best in advancing women’s leadership” is bullish on women entrepreneurs for good reason, Fry writes.
“We also control and direct 80 percent of consumer spending; we are more than half of the workforce; we are 60 percent of college graduates; single women are the fastest-growing group of first-time homeowners,” Krawcheck said. “And, we are starting businesses at two times the rate of men.”
On the same theme of investing in women, WE Capital launches in November, and is the brainchild of former biotech executive and S&R Foundation and Halcyon Incubator founder Sachiko Kuno and Sheila C. Johnson, founder and CEO of Salamander Resort and Spa and vice chairman of Monumental Sports and Entertainment, writes Virginia Coyne in Washington Life.
“The duo began to seek out other successful area women interested in investing in companies that make a social impact and WE Capital was born. Today, their consortium of 12 women, working through the venture capital firm Rethink Impact, has already committed over $12 million for gender-diverse companies that have women leaders or women on the management team. Gender diversity on management teams has been shown to improve company’s bottom lines,” Coyne writes.
According to Coyne, “Rethink Impact’s founder and managing partner Jenny Abramson and her San Francisco-based partner Heidi Patel say their firm invests in businesses trying to solve some of the world’s greatest problems with the goal of generating appropriate returns for investors at the same time.’”
That is because investing in women’s businesses and organizations run by women lags behind companies run and owned by men.
“A 2016 Bloomberg analysis found that female-led companies get 77 cents for every dollar male businesses receive, nearly mirroring the national pay gap,” Coyne writes. “A more dire statistic comes from the Wharton School, which found that although 38 percent of new businesses in the U.S. are started by women, female founders receive just two to six percent of venture capital funding. Recent reports by Forbes and TechCrunch also confirm that investing is indeed a man’s world: only six to seven percent of partners at top VC firms are women.”
Efforts have been sprouting up around the country to urge investors to commit to diversity in the companies they fund. But enthusiasm to close the investment gender gap is lagging.
In a recent LinkedIn survey, “more than half of investors surveyed said that an entrepreneur’s commitment to diversity was the least of their concerns when deciding whether to fund a company, according to the nationwide survey of more than 600 LinkedIn members. And 70 percent of startup founders said their company has no program in place to increase employee diversity,” writes Marisa Kendall in The Ledger.
That failure to act is not due to a lack of awareness.
“While the absence of women and minorities in tech is frequently addressed in panel discussions at industry conferences and in media op-ed pieces, for the people with the power to implement change — such as the investors shaping future Facebooks and Googles — the issue remains on the back burner,” Kendall writes.
According to Kendall, “Women make up 7 percent of entrepreneurs who receive venture capital funding, according to Bloomberg. And the majority of the world’s top 100 VC firms have no female investing partners, a recent CrunchBase study found.”
The inequities are there, and new projects, initiatives spearheaded by women investors who invest in women-run companies are moving to change all of that.
“’LinkedIn’s data confirms how broken today’s venture capital establishment is,’” Ellen Pao, co-founder of Silicon Valley diversity initiative Project Include, wrote in an online post the same day the LinkedIn study was released. ‘Many VCs don’t seem to care about the problems they create, how founders perceive them, and the lack of diversity in funding practices,’” Kendall writes.
“Anna Jones and Debbie Wosskow, founders of the smart new funding platform Allbright, also see an opportunity traditional investors are missing. Jones, currently the CEO of Hearst Magazines UK and Wosskow, who founded the world’s largest home exchange site, Love Home Swap, will not only invest in female founders but go a few steps further by combining an angel network with a crowdfunding platform and training resource,” Spalding writes.
That resource is called The Academy, that “caters to women at all stages of entrepreneurship, not just those fundraising to help with resources, mentors and plugging into the right networks.”
Jones tells Spalding in Forbes, “There are women who don’t need to raise capital. They have great businesses but need support in other aspects of scaling for the next stage e.g. creating a digital marketing plan. Between our talks, training and mentors, we’re confident everyone can gain something in our ecosystem.”
The world of investing is changing. Sequoia Capital, one of Silicon Valley’s most prestigious venture capital firms, recently hired Jess Lee as its first U.S.-based female investing partner. And elsewhere, Abigail Johnson, formerly CEO of Fidelity Investments, is now chairman.
As for personal investing, women also have different habits, preferences and outcomes as investors than men do.
“What’s interesting to note is that even though women tend to take home smaller incomes than men, they are better at managing personal debt. On average women have slightly lower debt balances than men. According to Experian, the average male’s debt balance for auto loans, credit cards and personal loans was $27,627 versus $26,610 for women in 2015,” according to a blog by Motif Investing on Benzinga.
“Women tend to be better than men at diversifying their portfolios. They are also less likely to take unnecessary risks with their investments than men. Taking fewer risks may result in more moderate than outsized gains if stock prices are going in the direction one wants, but can provide more downside protection if things take a turn for the worst,” according to Motif Investing.
And while women are less frequent traders, they have higher overall returns.
“A study by Berkeley’s Haas School of Business found that men engaged in 45 percent more trading activity than women. Being proactive with one’s investments is good practice, but trading too frequently can cut into profit margins as shown by research. In the six-year investment period monitored by Hass, higher trading volumes resulted in men having lower net investment returns than women.”
As for the dawning of a new age of women investing in women, many agree that is about time.
“’The idea that women could support other women, participate in the venture capital world and have the same type of returns, if not better than men, was really fun,’ says member Karen Schaufeld, a philanthropist and entrepreneur, “ writes Coyne in Washington Life. “‘But it’s also really nice to be able to think that we could do something that would help start, nurture and grow businesses.’”
“The answer lies in more women becoming investors, according to Tracy Gray, founder of the 22 Capital Group, an international business investment and advisory firm,” writes Daisy Lin in Huffington Post. ‘We need more women investors to have more capital going to women, because we can’t just wait for men to do it.”
About the Author
Michele Weldon is editorial director of Take The Lead, an award-winning author, journalist, emerita faculty in journalism at Northwestern University and a senior leader with The OpEd Project. @micheleweldon www.micheleweldon.com