Tuesday, May 6, 2014

Crain's NY Business: Startup scene lures female investors

More women angels bet on new ventures.

By Eilene Zimmerman
May 6, 2014 12:01 A.M.


Before Anastasia Leng left Google in August 2012 to co-found the startup Hatch, she told female colleagues of her plans. "They said, 'When you're ready, come to me for investment,' " said Ms. Leng.

They became key supporters. Female investors contributed $325,000 of the $1 million seed round for Hatch, a Manhattan-based marketplace where users can redesign jewelry, home decor and accessories posted on the site and have artisans around the world custom-make it. Hatch launched to the public last fall.

New York is fast becoming an epicenter of a trend that is helping entrepreneurs like Ms. Leng: Increasingly familiar with the world of startup funding through jobs at tech firms or their own businesses, more women are diving into angel investing, where they give startups a cash infusion in exchange for equity.

According to the Center for Venture Research at the University of New Hampshire, about 18% of angel investors in the U.S. in 2013 were women, down slightly from a high of 21.8% in 2012 but still significantly above the 12.2% the center tallied in 2011.

Female angel investors on New York City's startup scene say they are no longer an anomaly.

"I used to get asked when I walked into a pitch room if I was lost," said Angela Lee, founder of 37 Angels, a Manhattan-based investment network for women in Manhattan where half the members are entrepreneurs. "That doesn't happen anymore."

Given that women entrepreneurs in New York have been unusually successful at fundraising, perhaps it shouldn't be surprising that some want to put what they've learned to work as angels.

According to 2013 data from research firm CB Insights, the median funding received by all-female teams in New York—who make up 3% of local startup teams—was $4.5 million, compared with $2.2 million for all-women teams across the nation and $2.3 million for local all-male teams.

Meanwhile, more women-owned firms are going after angel financing. According to the Center for Venture Research, female entrepreneurs made up 16% of founders seeking angel capital in 2013, up from 12% in 2011.

"Women are becoming increasingly sophisticated in how they seek funding—no question about it," said Loretta McCarthy, a managing partner at Manhattan-based Golden Seeds, an early-stage investment firm, where 80% of the members are women. Golden Seeds, which invests only in companies with at least one woman at the helm, has backed 61 firms in the decade since it started—10 in New York City.

Of course, the big test for angels who back women-run firms will be their success in picking startups that raise more capital and make lucrative exits. Female entrepreneurs have had a hard time winning venture funding, and some may need coaching to secure it.

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