This is the second installment featuring the insights of a panel of speakers present at the New Hampshire High Tech Council’s TechWomen Power Breakfast called, “Wanted: Women Angels.” The panel reviewed information about angel investing and its opportunities. Read the first installment here.
As stated in our first installment, according to the University of New Hampshire (UNH) Center for Venture Research, in 2015 in the United States, only about 25% of angel investors were women. Increasing this percentage will have ramifications on the nature of angel investing because women invest differently than men.
Speaker Becky Stoughton, a vice president of Fuentek, LLC, described the world of angel investing. She stated that it is high risk, although less risky than investing purely philanthropically. Angel investors typically build a portfolio of different companies and delineate a portion of their portfolio to accept that risk, investing small pieces of it in several companies over an ongoing period of time.
Becoming involved in angel investing can be a scary thing to do, so it’s advantageous to work with an angel-investing group. You get access to better deals to invest in, and opportunities to share in the due diligence that needs to be done before investing in any kind of high-risk investment. Becky stated that New Hampshire has great angel-investing resources; five of the most prominent are: 10X Venture Partners, Northeast Angels, First Run Angels Group, eCoast Angels, and North Country Angels.
Angel investors typically invest in companies relatively local to their own communities, so there’s opportunity to have a big impact right where they live. According to the UNH Center for Venture Research, in 2014 there were 316,600 angel investors in the U.S. who invested a total of $24.1 billion in 73,400 entrepreneurs. One of the results was that each one spawned an average of 3.6 high-paying jobs.
In her prior career in technology commercialization, Becky became involved with “tech transfer,” which is the process of bringing technologies to market. Start-up companies are important to this process. Some of the reasons she enjoyed it was for the fun of being informed about the newest trends and technology; interacting with interesting, high-powered people who are trying to change the world; and the ability to make an impact. She said that when people invest in a company in a space in which they’re knowledgeable, they can have insights for the company that could be valuable and help them grow. Also, there’s a lot of appeal in knowing the founders and getting insight into the company and where it’s going.
For those who become angel investors, it’s important to set their expectations properly. Generally, they will be looking at long timeframes for a payoff, at least five years and even 10 or more. Ideally, they’ll see about 3X return on their investment, possibly more. However, while they can work toward a financial return, they have to be realistic about its high level of risk.
To be an angel investor, it’s necessary to be what’s called an accredited investor, which is a defined term in the financial world that means you either have over $200K in annual income (or $300K annually if you are married) or over a million in net worth. So the upside is hopefully a financial return over a longer period of time, and the soft benefits include being in the game and meeting interesting people involved in interesting projects.
Another of the panel’s speakers was Kendre Esme Rodriguez, who just graduated from the University of New Hampshire and was the founder and managing director of UNH’s Rines Angel Fund.
Kendre started college already interested in starting her own venture and wondering how one would raise capital as an entrepreneur. However, UNH’s curriculum didn’t get students involved with funding and venture capital until their senior year.
She started working with a professor, who also happened to be the director of the Center for Venture Research, and she began to visualize the potential for student-run initiatives at universities nationwide. She said that UNH offers connections for getting students involved with real-world experiences but not really with entrepreneurial ventures, so she pitched her professor on the idea of having a group of students manage a fund that would be donor-created, but students would have the opportunity to work in a variety of different sectors and co-invest with angel groups.
They succeeded in securing relationships with local angel groups and launched a class that provides students with a hands-on learning opportunity to interact with both entrepreneurs and investors. The members of the program also provide due-diligence research to local angel groups since angel groups often do not have staff dedicated to doing so.
In keeping with our theme of the underrepresentation of women in investing, in accepting applications for next year’s class they found that they had about 70 applicants, but only six were women. (Sigh.)
Stay tuned for the last installment sharing insights from the final speaker featured during the “Wanted: Angel Women” event at the NHHTC’s Tech Women Power Breakfast.
The TechWomen Power Breakfast series is an initiative of the New Hampshire High Tech Council, serving professionals enthusiastic about technology and supporting the efforts of girls exploring STEM as a career or area of study. Visit the NHHTC website for more information on upcoming TechWomen Power Breakfasts.
Candice Benson is an internationally recognized management consultant and CEO of Benson Consulting Inc. She is chairperson of the New Hampshire High Tech Council’s TechWomen Power Breakfast Series committee. Connect with her and her blog here.