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This blog post was adapted from an email exchange I had recently with a colleague who asked me about the behaviours and attitudes of women investors.

It is difficult to generalize and challenging territory to compare how men and women think and make decisions.  Just look at this research suggesting that women make better decisions than men…  and the comments.  Very fiery, very controversial.

I take a different approach.  Decision-making is complex.

Q:  Do women entrepreneurs start and grow businesses in spaces that have little competition (“blue sea” behaviour), show innovative approaches to business, start ventures in untested territory, which are in turn difficult to convince investors to invest?

The evidence is mixed.  Some women solve real problems that they have faced, possibly in areas with few existing products or services because they have not found a solution for themselves.  All entrepreneurial ventures have some element of untestedness.  Businesses with fewer unknowns (such as a familiar industry and known business model) can probably be started by bootstrapping or securing debt financing.  (For example, my friend started an independent music store – there was some “innovation” such as in-store concerts and a personal, rather than commoditized approach to consuming music, but the business model was essentially a CD retail store.  He was able to get a loan).
Innovative is within the eye of the beholder.  Pique Ventures’ impact lens considers purpose and how a business helps someone access resources – is it basic access to resources or more convenient access or something else?

Q:  Do women business angels get stuck in the details and take much more time to make a decision, as opposed to men (who will decide very quickly in a mix of gut instinct and analytical skill)?

Neuroscience and physiology affects decision-making too.  Higher levels of testosterone can cause someone to be more impulsive and take more risk (see John Coates, The Hour Between Dog and Wolf).
But people can actively change hormone levels (see Amy Cuddy’s TED Talk about power poses and how that changed testosterone and cortisol levels).
This research just scratches the surface.
I do believe women are more thorough and thoughtful in their research and decision-making.

Q:  Could the impact of women being interested in the detail be that it has an influence on their confidence to invest or not?  As a result, would they choose what they believe to be the safest or lowest risk investment opportunity?

 Not necessarily the safest.  I believe investors choose opportunities where they feel they can best manage the risk – familiarity, sector knowledge and expertise plays a role here.  What is safe to me is not necessarily safe to you.  What is safe to an entrepreneur (deep knowledge) is not necessarily safe to an investor (outsider).  Risk is personal.
In my personal portfolio, I have invested in “risky” stuff like high-yield debt and equities in emerging markets (and they did well!), but it’s because I had sector knowledge.  I was working in investment banking at the time and had access to more information.

Q:  Is it the slow, long decision-making process that actually prevents women to be drawn towards investing?  Are we are stuck with a mere 20% of all investors being women?

I disagree.  There is a big systemic issue here.
Also some people make investment decisions like they are purchasing decisions – net wealth and investable assets influences this. Someone wealthy may invest $50,000 in a startup, rather than buy a car.  Or $100,000 instead of a yacht.  And they may make their decision to invest just as quickly as they’d decide to buy a car or not.  But that’s not an investment decision, that is more like a purchasing decision.
It is not about encouraging more people to make investment decisions quickly.  On the contrary it is about encouraging more people to make integrated decisions – and maybe that takes a bit longer, but what goes in is what you get out.  Integrated decisions lead to integrated outcomes.  It’s not just about moving money to ventures more quickly, but rather more purposefully.
Also, women historically make less money than men (~70-77 cents on the dollar) and have not always been the decision-makers when it comes to investment.  So a $50,000 investment is a possibly bigger deal for someone with $700,000 than someone with $1 million.  Some people want their money to last longer – perhaps women take a longer, value-oriented view.  (See also Warren Buffett Invests Like a Girl by LouAnn Lofton.  This article mentions this book and discusses the long-term success of portfolios managed by women and the approach they take.)
There is a lot more psychology and neuroscience to this than I really know.
The accredited investor limitation also prevents a lot of women (and men) from participating in angel and venture investing.  For example, I have the expertise and some capital, but I’m not an accredited investor.  I have to make my own solution to invest and participate (one of the reasons why I am proposing the Pique Ventures fund!)
There are many other possible reasons that have kept more women from participating as venture investors.
  • The environment where investing is taking place might not be attractive to some people.  
  • Busy people find it challenging to make the time to invest – angel investing is very time consuming.  
  • Not everyone has access to the opportunities – angel investing requires a lot of networking. 
There is no simple answer.  But there is a solution – at least that is my hypothesis with the proposed Pique Ventures fund, a platform for integrated decision-making, a proposed fund structure that makes venture investing available to non-accredited investors in BC, and makes investing a fun and social activity.