To help explore the mysteries of Social Return on Investment, we talked to Wendy Gibbs of Inspire2Enterprise. There are many preconceptions about Social Return on Investment (SROI) that make it off-putting. For many smaller organisations for example, it may be the amount of time required by a member of staff to gather and analyse the […]Read More ›
NYC Pipeline Fellows: So, you want to be an angel investor?
Let’s play a word association game.
I say: Angel Investor – what’s the first word that comes to mind?
Money? Investment opportunities? Startups?
On February 10th, at the conference and official launch of the New York Pipeline Fellows, the words that came to mind instead were: Women, Diversity and Impact.
The Pipeline Fellowship trains women philanthropists to become angel investors through education, mentoring and practice. The fellowship aims to start changing the ratio of the angel conversations by diversifying the investor pool and investing in women-led for-profit social ventures.
“At present, women are seriously under-represented in angel investing. Women own about half of this country’s wealth but, by various estimates, make up no more than 8 percent of angel investors.” – Kauffman Foundation
The 2nd Pipeline Fellowship Conference, organized by Founder & CEO, Natalia Oberti Noguera, and COO, Lauren Abele, covered several key angel investing skills: Portfolio Strategy, Due Diligence, Deal Structuring, Valuation Methodologies and Post Investment Strategies. The conference kicked off by providing the audience with an overview of the angel investing sector.
Susan Preston, lead instructor at the Angel Resource Institute, addressed the funding gap that angels fill as well as the motivational factor of investing. Preston highlighted the fact that at the heart of angel investing, the relationships that you build with the entrepreneurs is what really matters, as opposed to looking at the exchange as a transactional one.
As the conference progressed and attendees dove deeper into the angel investing world, several key takeaways emerged:
1) Patience is required: Angel investing is a long-term commitment, with expectations for exits within five years, but one may have to wait seven years or more to enjoy positive returns on investment. A 1x return typically takes 2.5 to 3 years; a 10x return is expected to take 4-5 years.
2) Women-centered investing: Women need to take more risks and ask for more money. This key takeaway was especially prevalent in the valuation simulation session where groups were asked to value a company and negotiate from the point of view of an investor or investee. Women tend to undervalue their skills and should be bolder in a negotiation situation.
3) Diversity is needed: When we approach investing, diversity is not usually one of the criteria investors look for in deals. Opportunities are broken down by industry, stage and amount rather than the diversity that the entrepreneurs themselves bring to the table. What we need to do as investors is to recognize that in order to truly create a supportive environment, we need to consider a broader definition of what a diverse portfolio means. Are we taking into account minorities, gender and the impact of the investment? At the Pipeline Conference, this theme was thoroughly emphasized by panelists and their commitment to supporting women-led for-profit enterprises.
“The mission the Pipeline Fellowship has of empowering women to become angel investors […] fills an extraordinary gap in the marketplace. There are women starting companies, we’d like to see more, but there certainly are some. But, the notion of having a track devoted to encouraging women to help other women by being investors…we thought [that] was novel and that the time was right for it.” – Bill Schnoor, Partner at Goodwin Procter LLP.
The Pipeline Conference was truly an eye-opening experience on the different perspectives in approaching angel investing. Congratulations to the New York Pipeline Fellows Class. Here’s towards a step to changing the ratio in the angel investing world and creating an impact.
Photo credit: Erica Torres