Would you be an angel &...invest in a female founder?

As if it illustrate the diversity problem, I tried to find an image I could use for this issue. Searching versions of Angel investing or Venture capital…it took me a LONG time to find a women in an image!

There are three core reasons I want to introduce this asset class to women in particular.

1. I want more women to invest in it so they might be able to benefit financially.
2. Getting more women investing in venture I believe will help get more women led ventures funded - and that could again help women financially.
3. Women often create business with a social or long term positive impact, so if more of them can get funded we get more of that impact.

⚡ Quick Hits

• Shocking Statistics: Women-led startups receive less than 3% of venture capital globally.
• Wealth Concentration: 58% of VCs are white men and control over 90% of venture funds.
• Ripple Effects: Successful exits create wealth for entire regions, not just founders

Before we dive into the diversity problem (two small words for such a massive problem) let’s first understand why this somewhat unknown asset class exists and how the it works.

🚀 Why Startups Need Venture Capital

Despite these problems, venture capital serves a crucial function in our innovation economy. Here's why it exists:

The Scale Challenge: Promising startups often have breakthrough technologies or business models that could transform industries. But they face a fundamental problem – they need significant capital to scale quickly before competitors catch up.

Consider a startup developing revolutionary clean energy technology. They have two paths:

1. Bootstrap slowly: Use revenue from early sales to gradually expand
2. Scale rapidly: Get external investment to hire world-class scientists, build manufacturing facilities, and capture global market share

For truly transformative companies, slow growth often means losing to faster, well-funded competitors.

Startups use venture investment to:

• Expand into new markets rapidly or offer competitive pricing to gain market share
• Hire top talent and develop cutting-edge products
• Build infrastructure capable of serving millions, not hundreds, of customers
• Fund research and development for breakthrough innovations

🎯 The Exit Moment: When Paper Wealth Becomes Real

The ‘money moment’ happens during an "exit" – when investors and employees can actually convert their equity stakes into cash:

Initial Public Offering (IPO): Company lists on stock exchange, allowing shares to be traded publicly

Acquisition: Larger company purchases the startup. When Microsoft bought LinkedIn for $USD50bn, it created thousands of LinkedIn employee millionaires overnight

Large investment: A large investment is made at a certain valuation which allows early investors to be paid out.

💰 The Wealth Creation Ripple Effect

When venture capital works, the wealth creation extends far beyond the founders we often see in the headlines.

The Canva Example:

• Founders: Melanie Perkins and her co-founders became billionaires at the point their shares became tradeable and Canva was valued at around $USD26billion.
• Employees: Hundreds of Canva staff became millionaires through equity packages – not just executives, but designers, customer service reps, and junior developers
• Early Investors: Those who invested early saw massive returns
• Regional Impact: Canva's success pumped billions into the Australian economy, generated enormous tax revenue, attracted international investment, and established Australia as a legitimate tech hub

This pattern repeats globally. When investors in Ethique, the New Zealand zero waste beauty brand, were able to exit n 2020 some saw returns as high as a 48x of their original investment. With a large investor base from an early crowd funding campaign this meant a lot of ‘normal people’ made a lot of money!

🔍 How Venture Capital Became a Massive Industry

Venture capital used to be quite a small, relationship-driven industry. From just a few dozen firms in the USA in the early 1980s, there were over 650 firms by the end of the decade managing around $4billion of funds.

Then came the internet boom. By 2021, venture capital set a new record of approximately $345 billion in the United States alone. The industry reached peaks of around 900 active firms managing $230 billion before the 2008 financial crisis.

Like Wall Street in the 1980s, venture capital has become an attractive career destination for graduates. What was once a cottage industry has transformed into a massive wealth-creation machine – but one that's maintained its historically homogeneous networks and narrow decision-making patterns. The bias to invest in ‘people that look like me’ is a very hard one to overcome.

📊 The Uncomfortable Truth

Here are the current statistics that reveal the depth of this industry's diversity problem:

• All-women founding teams receive only 2.2% of venture capital allocated for 2024. This number drops to under half a percent if you’re a women of colour.
• Only 1.87% of $31 billion held by 200 venture capital funds has been allocated to startups with diverse leaders according to Diversity VC
• Women made up 17.3% of the decision-makers in US VC firms with at least $50 million in assets under management, while 82.7% were male.
• We are getting more women led funds being set up, but they generally manage far lower amounts of money.

💡 Change the players to change the system

The solution isn't to abandon venture capital – it's to change who controls it.

My belief is we need to stop asking the existing venture capitalists to please invest in women. They are all doing just fine out of their fund management fee regardless of who they invest in - so have no incentive to change. What we need is to have more women ‘in the game’. This won’t change things overnight, but we have to start taking much longer timeframes when we consider change, and starting small in this area will deliver compound growth overtime.

Often women who come into wealth choose philanthropy over investing in growth areas like venture. It's easy to think giving money away is better than investing it and potentially getting even richer! But the reality is we need those women investing in venture capital because they're the ones with the power to really move those female founder stats.

Melinda French Gates' Pivotal Ventures exemplifies this perfectly – she's committed $2 billion through her family office to support women's rights and economic mobility, investing not just through philanthropy but also in women-led funds and startups that serve women.

Alongside this we need all women participating as investors. When we do this we're not just seeking returns – we're helping determine which innovations get funded and which entrepreneurs get their chance to build world-changing companies. It’s also a great way to be aware of new trends and tech as you get to see all the new startups seeking investment. It also does not require you to be investing hundreds of thousands of dollars. Through Angel syndicates you can often invest as little as $5000, or with crowdfunding equity raises it can be even less.

🎯 The Path Forward

The more women and diverse investors who understand and participate in venture capital, the more likely we are to see capital flow toward the innovative solutions our world desperately needs.

Understanding this system – and potentially participating in it – means engaging with one of the most powerful wealth-creation engines in the modern economy.

Next week, I’ll touch on the practical ways individual investors can access venture opportunities and what to look for when evaluating startup investments. If you have any questions in the meantime drop a reply here.

And if you would like more detail on how this world works, I previously wrote a short series looking at the mechanics of VC here - it was then supposed to go into what we would do to fix it but that’s still a work in progress!!Q

Keep Looking Up, Sally