Samina Farid, Managing Director, Farid Ventures
Historically in theatre, wealthy patrons who stepped in to provide money for productions on Broadway that would otherwise shut down were called Angels. If the productions were successful, these theatre angels would recover their investment and also receive some of the proceeds from profit. They also risked losing all their investment. In 1978, Professor William Wetzel who founded the Center for Venture Research started using the term “Angel” to describe investors who helped entrepreneurs raise seed capital so their startup businesses could be nurtured. Investment Angels invest in startup businesses and profit when these businesses succeed. Without Angels many creative and brilliant productions, products and services would never be in our lives.
When Stephanie Newby, a JP Morgan executive, founded Golden Seeds in 2005 she wanted to grow the pipeline of female entrepreneurs, female executives, and female-friendly companies. What better way to do that than show that women can start and run companies as effectively as or better than those run by men. As women like me left the corporate world, frustrated by its glass ceilings, and eager to prove our leadership capabilities by forming our own companies, we needed Angels. Unless they are fortunate enough to be independently wealthy, entrepreneurs must be able to attract the capital they need to survive while they establish their brand and build their client base. We needed Angels that would listen to our ideas, serve as advisors, help gain valuable introductions and provide the needed seed capital to help us get our companies to the point of raising enough revenues to exist and hopefully flourish. In 2005 and even today, investors, are largely white men, a fraternity that is hard for entrepreneurial women and minorities to access for financial support. Where were the Angels who would risk money on startups started by women?
Business has historically been a man’s domain. I remember the startup days of my software company, a company that later had a wonderful nine-figure exit. There were no Angels interested in investing in a woman bringing automation to the oil field. After all, what do women know about technology and energy, even a woman who had over 15 years of experience in technology and energy as I did when I started my company? Now, imagine a woman founder seeking capital for a market that a male investor doesn’t even understand. Imagine seeking capital to create a company to rent evening wear like Rent the Runway or creating beauty products. Emily Weiss, Founder of Glossier (valued at $1.2 Billion) is quoted in Entrepreneur magazine as saying “Beauty wasn’t a category that many [venture] firms were interested in exploring.” Even when funds were offered they were much less than what was offered to male founders. Huda Kattan, founder of Huda Beauty (Also valued at $1.2 Billion) said “There were so many times where we would have meetings with people who would try to sweet-talk us into a deal, because they thought we were naïve women who would take anything in order to get started.”
Women have a 30% lower likelihood then men of receiving angel investments, and when they do, the amount is 17% lower than men. Additionally, per the 2019 HALO Report by the Angel Resource Institute and PitchBook, companies with male CEO’s had 73% higher valuations than their female counterparts. Sadly, despite studies that show that businesses founded by women deliver 2.5 times higher revenues per dollars invested than those founded by all men and the fact that in 2019 there were 21 startups founded or co-founded by a female that became unicorns (or businesses valued at over $1 Billion), many great business ideas and great women founders will not succeed because of the lack of investment resulting from gender bias. Crunchbase expects that funding for female founders will be significantly worse in 2020 as compare to the year before.
When Golden Seeds was formed, it became one of the first, much-needed angel investment networks focused on supporting and funding women-led start-ups. In 2020 it celebrated 15 years of championing and investing in women-led startups. While there are many other worthwhile investment choices like Artemis and Portfolia also focused on women investors and entrepreneurs, Golden Seeds has established itself as one of the largest investment networks in the country, having had more than 870 men and women investors in 34 states over the years and investing over $135 million in 200 companies that have gone on raise more than $1.2 billion of addition capital. Three of Golden Seeds’ portfolio companies have received distinction from the World Economic Forum as being global transformers: Cadenza Innovation, Otto by Devcon, and Kalion. Golden Seeds is ranked number 2 in the list of Top US Angel Groups Ranked by Number of Deals in the 2019 HALO Report.
Golden Seeds is especially proud of its nation-wide footprint with chapters across the US including the flagship New York office, Boston, Silicon Valley/San Francisco, Arizona, Atlanta, New Jersey, Dallas and Houston. This nation-wide presence gives Golden Seeds investors access to startups from key innovation centers across the US, as well as the expert knowledge of colleagues from many different industries and backgrounds that is needed for effective due diligence. For entrepreneurs, this nation-wide presence allows them to present themselves to angel investors across the US through one organization. For both investors and entrepreneurs, Golden Seeds offers an extraordinary networking opportunity. Golden Seeds also has access to many deals for its investors and additional sources of capital for its entrepreneurs through its relationships with other angel groups and venture capital firms.
Golden Seeds and other women focused funds have had a positive impact in getting more women to invest. In 2004, only 5% of angel investors were women and in 2019, the number had grown to 29 percent. Having more female and minority investors will, most experts believe, give women and minority founders parity in capital raises. Last year, Golden Seeds started its Access to Capital Initiative to provide greater support to Black Women Founders.
While there has been much progress, we still need more angels supporting women entrepreneurs.
However, Angel Investing is not for everyone. While the return on investment from successful startups can be extremely high, many startups fail, so Angels need be able to withstand the cost of their investments and the time expectations for returns. It can take 7 to 10 years before you recover your money and profits through a liquidity event such as an IPO or acquisition. Most reputable investment groups and funds, including Golden Seeds, require that you be an accredited investor, specifically that you have a minimum net worth of $1 million (not including your primary residence) or earn at least $200,000 per year (for single, $300,000 for couples). It is also recommended that you do not invest any more than 5-10 percent of your investable assets in startups and, over time, build a portfolio of 15 – 20 companies. Ideally, it is good to join a group like Golden Seeds that has investor training as well as experienced people to engage in the research, diligence and negotiations needed in making a good investment. By the way, if you enjoy business or want to learn more about businesses and investing, it is a fun learning experience to participate on a due diligence team or to join in monthly Office Hours meetings held by the Houston Chapter as well as the other Chapters where entrepreneurs pitch their ideas. Golden Seeds also has a fund for those who prefer less active participation with fund managers selecting the fund’s portfolio companies.
If you can do it, become an Angel and support women-led companies in Texas and across our country and create more female unicorns.
For more information on Golden Seeds’ Houston Chapter membership contact Samina Farid at samina@farid.com or Suzan Deison at sdeison@ghwcc.org. We would love to invite you to observe a Golden Seeds meeting and see the group in action.