You don’t need to go out and start your own venture capital fund in order to invest in early stage private companies. New vehicles are emerging that — unlike traditional venture capital funds which require writing several hundred-thousand to million-dollar checks in order to participate as a limited partner — allow a smaller check size to invest in early-stage private companies. Investing in women founders can give back even greater dividends — what’s also known as a triple bottom line. As an investor, you can:
- Support a business that has a positive impact on society and help spur innovation in an industry you’re passionate about;
- Support more women in gaining leadership roles and help create a more equitable playing field for women in business; and
- Generate a potential financial return that builds wealth and financial stability for you, your family and your community.
You’ll also be part of a growing movement of women who are pooling their capital to nurture the next generation of female founders and build an ecosystem in which women entrepreneurs can access the resources they need to thrive and succeed.
So how do you get started as an investor in startup companies? While there is no one right approach, here are nine quick tips for kickstarting your investment strategy.
Tip #1 – Define your goals. You want a financial return, sure. However, you might also have the desire to help create a more equitable environment for women in business or have deep passion for a particular business or industry (i.e., healthcare, education, technology, fashion, consumer products). Whatever your interests, you can leverage your particular expertise and play to your strengths. Investing is a personal decision and it’s okay to invest in something or someone simply because you believe in them.
Tip #2 – Decide how much capital you have to put to work. While we’re not investment advisors, we believe the amount of money you have to invest should align with your tolerance for risk. Venture investing is high risk. Startups have a high failure rate, so you may never realize a financial return. But the financial rewards can be far greater when the company you invest in succeeds. Helpful resources such as 37Angels and Angel Capital Association can help you determine the right course for you.
Tip #3 – Do your research and build your knowledge of the VC industry and its lingo. Subscribe to industry newsletters such as The Information, PitchBook, TechCrunch, Women’s PE Briefs, Ellevest, Recode, Forbes and others that cover venture capital, private equity and investing. For a deeper dive, check your local university for classes and seminars on angel investing. There is also a wealth of great books on the topic that you don’t need an MBA to understand.
Tip #4 – Join or follow an investor network focused on supporting women entrepreneurs. Plum Alley, Portfolia, Astia and SpringBoard Enterprises are among a growing number of organizations devoted to increasing the number of women funding women and diverse founders.
Tip #5 – Attend conferences and pitch events to network, listen and learn. Check out Project Entrepreneur, Forbes Women’s Summit, Sheworx, 500 Startups and others that connect investors with promising women-led startups. Numerous business schools at universities also host student business competitions and pitch events that are open to the public. GingerBread Capital also hosts periodic “Women Investing in Women” events and webinars. (Check out our in-person education and networking event in Los Angeles!)
Tip #6 – Determine where you want to be on the investment spectrum. Do you love the thrill of starting something from the ground up? Or have you spent your career running large, mature organizations? Your professional experience can inform where you want to participate, whether that’s early-stage angel, seed, or Series A, mid-stage Series B/C/D, or late-stage growth and pre-IPO.
Tip #7 – How involved do you want to be in the company? Traditional institutional investors prefer to take a lead role in the company’s management and typically set the terms of the financing. Depending on your experience, check size, and desired involvement, you can also be helpful to a company as a non-lead investor. In addition to being an investor, you can serve as a trusted advisor or board member, or lend your industry or management expertise, contacts and reputation to help drive the founder’s business forward.
Tip #8 – Be patient and realistic. Venture investing is a long game. Expect an early-stage company to have multiple inflection points and several rounds of financing. The outsized returns always get more attention than the losses investors experience. Don’t expect to have a liquidity event in the near term. Let every investment you make inform the next one and guide your portfolio. Help your founders accomplish their goals and you will succeed with them.
Tip #9 – Invest in people you believe in and trust, and be a part of their success. Most founders can pinpoint from the earliest days the investors who made an impact well beyond just the size of their check. That investor might as well be you!
