Closing the gender gap in angel investing

Angel investors typically help nascent companies with funding in exchange for equity. Angel investing is one area of finance that has seen a lot of recent strides towards closing the gender gap. “Marketplace Morning Report” host David Brancaccio spoke with Loretta McCarthy, a veteran angel investor who heads up a group that is centered on helping early-stage founders get their ideas off the ground. She’s also a co-CEO and managing partner of Golden Seeds Venture Fund, a network that connects investors with female founders. The following is an edited transcript of their conversation.

David Brancaccio: It certainly seems that when angel investors were mainly guys, they would overlook promising women-owned companies.

Loretta McCarthy: In part, it was that women were not applying for that angel investment funding at the pace at which they are today, but also in those years, 95% of all angel investors were men. Today, it is a very much larger percentage that are women. So that has changed a lot, I’m happy to say, in the last 20 years, but it was very common for men to be investing principally in men in those days.

Brancaccio: Now, on the other side, women-owned companies that receive the angel money also, that percentage is getting much larger.

McCarthy: Absolutely, and that has grown pretty much in parallel to what has happened on the investor side. So companies led by women 20 years ago represented only about 3% of all of the companies that got this funding that we’re calling here seed stage funding. So fast forward to 2023, that number has also grown to about 45% and I must say that although many women investors are taking real interest in these companies, it is the entire universe of angel investors, which, of course, is a lot of men still who are finally, at long last, recognizing the high-potential companies that are being created by women.

Brancaccio: Now, Golden Seeds is an organization that really does have a social mission. It wants to make the world a better place, but let’s remind ourselves, it’s not a charity for the angel investors. This is very much about finding investments that would make money.

McCarthy: It is absolutely not philanthropy. We are serious investors here at Golden Seeds. We definitely have a goal of changing the investing landscape. Many people also come because they believe that gender diversity is just simply a better thing. That diversity in general improves decisions and discourse and dialog about every decision. There are many people who believe that this investing will give their investment portfolios a boost. Those are the people who believe that having women in the mix, running companies that they’ve invested in will produce better results.