A LinkedIn series diving into the personas and how to mobilize them
Investing in startups gets lots of attention from the media, yet is still not a mainstream investment strategy - only a tiny fraction of accredited investors put their money into startups. And the vast majority of those that do are men. However, investing in startups can be one of the most dramatic wealth-building strategies for qualified investors – as long as they have a good strategy. So why aren’t women investing in startups?
Women startup founders continue to face additional hurdles to venture funding, which significantly curtails their ability to innovate, create and build valuable companies across industries.
To better understand the obstacles facing women as investors, How Women Invest recently commissioned never-before-examined research to understand the difference between how women and men invest, and to identify how to motivate more women to invest in startups. Our hypothesis: if more women invested in startups, more women-led startups would be funded and able to scale to make a difference in their industries. The research proved our hypothesis and much more. Women are savvy and sophisticated investors. Cater to them and they will invest their money in startups.
Four Personas Identified
How Women (and Men) Invest in Startups examined existing research as well as responses to a proprietary survey of qualified accredited investors in the US. Analysis of the data yielded four distinct personas of women investors: the first is the Self-Reliant Investor.
What is the Self-Reliant Investor?
Self-reliant investors are confident investors who rely on their knowledge and research, and are most likely to manage their portfolios themselves. Investors in this category are likely to be Gen Xers and Baby Boomers, most with portfolios of $2.5 million or more. These women want to work for themselves, manage their own investments and are not likely to use a financial manager.
Self-reliant female investors are also the most likely to be involved in investment groups where they can share their knowledge and expertise and benefit from the wisdom of the group. Investment groups allow women to monetize their expertise by developing investor scorecards, forming and leading syndicates, becoming scouts for venture funds and crowdfunding platforms, or sharing the criteria they use for due diligence as part of their thought leadership.
The Self-Reliant Investment Style
A self-reliant investor wants to be confident in their investment decisions. They stay highly engaged in managing their portfolios and often do research when making investment decisions. Emphasizing ROI is important to this group of investors, but without risking the overall value of their portfolios. These women are most likely to be investing in startups directly or as a limited partner and are likely influenced by investor groups they belong to.
How to Motivate Self-Reliant Women Investors: What does a company do to get her to invest?
Self-reliant investors are a market opportunity for small, emerging, and diverse managers, investment groups, crowdfunding platforms, and Self-Directed IRAs (SDIRAs). Industry players can leverage these women’s influence through partnerships. To attract these women, emphasize ROI while also making an impact. Self-reliant investors will look for investments that align with their values, companies that are making a social or environmental impact while ensuring gender equality and growing their portfolios.
This group of investors become hesitant when an investment is too illiquid, risky or time-consuming. Here are five ways self-reliant investors overcome resistances, ranked from most desirable:
Investing alongside experienced investors.
Allocating investments across several startups.
Investing with a community whose values align with theirs.
Professional management of the investment process.
Investment of $25,000 or less.
Regardless of investment style, investing in startups is a win/win strategy for women. If more women invest in startups, more women-led startups will receive the capital they need to scale their businesses and make a difference in their industries. Understanding what motivates women with different investment personas is just one step in the roadmap to unlocking women’s wealth to become a source of startup funding.