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Investing and financial decision making: ‘Why can’t a woman be more like a man?’

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23 February 2022

Since the first International Women’s Day was honoured 111 years ago, the role of women in global economies has changed rapidly, and along with it developed a shift in perceptions of gendered propensity for risk in the sphere of financial dealings.

Today we see an increasing number of women starting and growing entrepreneurial businesses, heading up or firmly installed in C-suites globally and assuming main breadwinner roles within households. Further, women’s purchasing power is increasing exponentially as they drive changes in consumer marketplaces.

Yet, despite increasing personal wealth and control over personal assets, the role and visibility of women within investment ecosystems remains sparse. Let’s focus on the business angel landscape. In Aotearoa New Zealand, there are approximately 900 business angels, 20% of whom are women (Angel Association, NZ). This compares less favourably with the US, where women angel investors currently represent 29.5%, but still fares better than the UK at 13%.

So why is it that fewer high-net worth women are willing to consider investing as a viable asset class in an area where they can transfer valuable skills and expertise they have accrued during their careers to support early-stage entrepreneurs?

Risk taking

Current perceptions portray women as financially cautious and risk avoiding, qualities deemed unsuitable for ‘serious’ investing. Yet ironically, during the 18th and early 19th centuries, high-risk speculative investments within early capitalism were particularly associated with femininity (Maltby and Rutterford 2012). Wealthy aristocratic women were influential investors, speculators and gamblers. However, this is not to assume that such activities were viewed favourably. Femininity, risk and speculation were linked together as women were associated with poor self-control and so deemed more likely to act upon irrational whims!

As financial markets developed, investment protocols were regulated, separated from riskier speculation and thus reconstructed as a rational, masculinized and professional activity (Searle 1998). Consequently, from the 19th century onwards, women were gradually excluded from investment markets.

The purpose of this historical overview is to illustrate how perceptions of gendered propensity for risk in the sphere of financial dealings have historically shifted over time. Consequently, the contemporary assumption that women are natural risk avoiders is not supported. Rather, it is a reflection of shifting socio-economic norms, which have aligned femininity with caution and related weakness; inherent biases that have been sustained throughout the centuries and discouraged women to enter into investment arenas.

Retrofitting

Honing in again on the business angel context, ‘retrofitting’ implies that women angels must fit a certain (masculine) angel persona; there is little room for diversity or difference. As part of a larger study, I interviewed the Chief Executive of the UK Business Angel Association (UKBAA) who was very mindful of both the barriers and opportunities for women angels investing in the UK. Following is a direct quote:

My biggest challenge to address is retrofitting women into predominantly male groups. I attended an angel event, probably one of the top performing angel groups in the UK, two years ago. And there were 80 men in the room and aside from myself, the only other woman in the room was the administrator.  I said, ‘There are 80 men in this room, where are the women?’  They were absolutely stone-like in reply, ‘We haven’t found any women suitable to join us’ and I said, ‘What are you talking about? You are in Cambridge, you are surrounded, your wives no doubt are highly suitable people for a start, but you are surrounded by the most amazingly successful women entrepreneurs. Women in science, women in innovation, women in academia!’ So they went off and formed a little taskforce of three men and they’ve actually now got three women joined, very, very high level women and they’re there to get more. And they sent me an email saying, ‘We’ve formed this taskforce and we’re going to get more women to invest but they’ve got to meet these criteria…’ And I said, ‘that’s very well, but what are your messages as to why a woman would want to join your network? Not just these are the criteria.’”

The requirement to meet certain criteria can be problematic, particularly if this criterion is drafted in the image of the current, stereotypical male investor. Thus, when trying to encourage nascent women angels to join angel networks, such criteria may deter them from even approaching a network in the first place.

Re-imagining

Increasing participation of women angels in investment networks has the potential to create more robust entrepreneurial ecosystems (EE), particularly with respect to diversified thinking in investment opportunities. We need to shift the paradigm so that we actually feminise finance and value the insights and perspective women investors can bring to the analysis of investment opportunities.

Increasingly, decisions in investing and entrepreneurship are about betting on people, addressing social problems or trying to find balance among conflicting interests. These decisions have human and social consequences in addition to financial ones, which is arguably where women push the boundaries more.

The emergence of women investor networks, such as Arc Angels and SheEO, are certainly shaking up investment landscapes but they do need to be supported and endorsed by the wider EE if they are to sustain legitimacy and attract more women to become investors. That said, mixed angel groups also have a responsibility to critically reflect on their own practice and operations to ensure they are eliminating gender bias where possible and not unintentionally (or intentionally) excluding women as both potential investors and recipients of capital as entrepreneurs.

Women choose to become angel investors for a variety of reasons and it is arguably this variance that has the potential to re-imagine the space of angel investing for the greater good.

Dr Janine Swail
Senior Lecturer – University of Auckland Business School

University of Auckland wins international award for entrepreneurship education
University of Auckland wins international award for entrepreneurship education

social media

23 February 2022

Since the first International Women’s Day was honoured 111 years ago, the role of women in global economies has changed rapidly, and along with it developed a shift in perceptions of gendered propensity for risk in the sphere of financial dealings.

Today we see an increasing number of women starting and growing entrepreneurial businesses, heading up or firmly installed in C-suites globally and assuming main breadwinner roles within households. Further, women’s purchasing power is increasing exponentially as they drive changes in consumer marketplaces.

Yet, despite increasing personal wealth and control over personal assets, the role and visibility of women within investment ecosystems remains sparse. Let’s focus on the business angel landscape. In Aotearoa New Zealand, there are approximately 900 business angels, 20% of whom are women (Angel Association, NZ). This compares less favourably with the US, where women angel investors currently represent 29.5%, but still fares better than the UK at 13%.

So why is it that fewer high-net worth women are willing to consider investing as a viable asset class in an area where they can transfer valuable skills and expertise they have accrued during their careers to support early-stage entrepreneurs?

Risk taking

Current perceptions portray women as financially cautious and risk avoiding, qualities deemed unsuitable for ‘serious’ investing. Yet ironically, during the 18th and early 19th centuries, high-risk speculative investments within early capitalism were particularly associated with femininity (Maltby and Rutterford 2012). Wealthy aristocratic women were influential investors, speculators and gamblers. However, this is not to assume that such activities were viewed favourably. Femininity, risk and speculation were linked together as women were associated with poor self-control and so deemed more likely to act upon irrational whims!

As financial markets developed, investment protocols were regulated, separated from riskier speculation and thus reconstructed as a rational, masculinized and professional activity (Searle 1998). Consequently, from the 19th century onwards, women were gradually excluded from investment markets.

The purpose of this historical overview is to illustrate how perceptions of gendered propensity for risk in the sphere of financial dealings have historically shifted over time. Consequently, the contemporary assumption that women are natural risk avoiders is not supported. Rather, it is a reflection of shifting socio-economic norms, which have aligned femininity with caution and related weakness; inherent biases that have been sustained throughout the centuries and discouraged women to enter into investment arenas.

Retrofitting

Honing in again on the business angel context, ‘retrofitting’ implies that women angels must fit a certain (masculine) angel persona; there is little room for diversity or difference. As part of a larger study, I interviewed the Chief Executive of the UK Business Angel Association (UKBAA) who was very mindful of both the barriers and opportunities for women angels investing in the UK. Following is a direct quote:

My biggest challenge to address is retrofitting women into predominantly male groups. I attended an angel event, probably one of the top performing angel groups in the UK, two years ago. And there were 80 men in the room and aside from myself, the only other woman in the room was the administrator.  I said, ‘There are 80 men in this room, where are the women?’  They were absolutely stone-like in reply, ‘We haven’t found any women suitable to join us’ and I said, ‘What are you talking about? You are in Cambridge, you are surrounded, your wives no doubt are highly suitable people for a start, but you are surrounded by the most amazingly successful women entrepreneurs. Women in science, women in innovation, women in academia!’ So they went off and formed a little taskforce of three men and they’ve actually now got three women joined, very, very high level women and they’re there to get more. And they sent me an email saying, ‘We’ve formed this taskforce and we’re going to get more women to invest but they’ve got to meet these criteria…’ And I said, ‘that’s very well, but what are your messages as to why a woman would want to join your network? Not just these are the criteria.’”

The requirement to meet certain criteria can be problematic, particularly if this criterion is drafted in the image of the current, stereotypical male investor. Thus, when trying to encourage nascent women angels to join angel networks, such criteria may deter them from even approaching a network in the first place.

Re-imagining

Increasing participation of women angels in investment networks has the potential to create more robust entrepreneurial ecosystems (EE), particularly with respect to diversified thinking in investment opportunities. We need to shift the paradigm so that we actually feminise finance and value the insights and perspective women investors can bring to the analysis of investment opportunities.

Increasingly, decisions in investing and entrepreneurship are about betting on people, addressing social problems or trying to find balance among conflicting interests. These decisions have human and social consequences in addition to financial ones, which is arguably where women push the boundaries more.

The emergence of women investor networks, such as Arc Angels and SheEO, are certainly shaking up investment landscapes but they do need to be supported and endorsed by the wider EE if they are to sustain legitimacy and attract more women to become investors. That said, mixed angel groups also have a responsibility to critically reflect on their own practice and operations to ensure they are eliminating gender bias where possible and not unintentionally (or intentionally) excluding women as both potential investors and recipients of capital as entrepreneurs.

Women choose to become angel investors for a variety of reasons and it is arguably this variance that has the potential to re-imagine the space of angel investing for the greater good.

Dr Janine Swail
Senior Lecturer – University of Auckland Business School


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