Alicia Robb is a senior fellow with the Ewing Marion Kauffman Foundation, where she has carried out extensive research into women’s economic empowerment and entrepreneurship. She co-wrote The Rising Tide: Finance for Women-owned Firms with Susan Coleman, which helped women entrepreneurs understand different financing structures and options for their businesses. But it was when they wrote follow-up book The Next Wave which also addressed the investment gender gap at VC firms and angel groups, that she had the idea for Rising Tide.
Tell us more about the thinking behind starting Rising Tide - where did you see the gap?
When we were researching The Next Wave there were very tangible specific reasons why there weren't more women in angel investing. They didn't know about it, they didn't see women angels, they didn't have dealflow, they weren't asked to be part of angel groups, they were risk-averse to making that first large investment and they didn't want to do it when they didn't feel confident.
When we looked at all the programs that focused on women angels, none of them addressed every single one of those issues. So there's great angel groups like Golden Seeds, Astia Angels, Pipeline Angels, 37 Angels but none of them really addressed the issue of not wanting to make that first large investment right off the bat. I decided it was time to put my research findings into a practical application and the Rising Tide Program was born.
Kauffman agreed to sponsor the education and training side, so I set out to start the fund independently. I was originally going to do launch a syndicate on Angellist but ultimately decided on Portfolia, because Angellist doesn't collect gender disaggregated data and there is a feeling among some investors that they aren't doing enough to include and encourage women.
When I was speaking about the fund and training program in Europe after we’d started signing people up, Candace Johnson, who is president of the European Business Angel Network (EBAN) said that we needed to do the same thing in Europe. So I also worked with her and EBAN and Go Beyond Investing to launch that program simultaneously with the one in the US, and we closed both funds in December of that same year.
What is different about the structure of the program?
We bring together 99 women into a fund and we each invest a minimum of $10,000 (or 10,000 euro). We make up to 10 investments from each fund (which are each about a million dollars/euro), so investors get a diversified portfolio from that one 10K investment. There are education and training components, with online webinars and podcasts and book readings. Every month companies would pitch to our members, and then we'd have an “ask me anything” session. People could opt in to help on due diligence teams as well. So over the course of the year they've seen dozens of deal opportunities, they've seen due diligence on 20+ companies, and they’ve gone through 10 investments. They’ve also been mentored along with way by experienced women angels. We had several in person meetings as well in various locations, so that women could meet each other face to face.
I think it addresses everything that previously stopped people from doing angel investing. We brought people in who had never really thought about being an angel investor. We just finished our 10th investment and have fully deployed the funds from the US Fund.
The European model is slightly different. They're holding back some of their funding for follow-on; we're deploying all of our capital and then raising subsequent funding for any follow-on investments that we do. They had the additional challenge of nine leads from nine different countries and they have investors from 20 different countries! We've got women from more than 20 states and 5 countries in our fund. So I'm sure there's additional cultural and language challenges that we're not having to deal with, in addition to making investments in several different countries.
The dynamic between the 90 and the 9 leads is interesting. Do you think the lack of having someone to learn from is a block to women investors?
I think if you go to most angel groups, a lot of them are predominantly male and so it can be a little daunting asking for mentorship. Having an all-women model we thought seems to resonate with people. I do think one of our marching orders is to go off and become part of co-ed angel groups and bring our voices to the larger ecosystem because we are in such a minority. I ultimately don’t think we should silo ourselves away, but I think it’s a welcoming and supportive environment for first time angels and women who like to be part of a women’s network and it’s a great way to get people in the door.
Has your criteria for the 90 participants changed for future programs?
We were expecting most people to be first time angels, but so many women that joined were actually experienced themselves or active in venture capital, but just wanted to be part of the network. So that was a bit of a surprise. I guess another part of the surprise is that many people came primarily for the network and not the training or education piece, which I had thought would be the driving factor. So we had everyone from people who'd never made an angel investment and didn't know anything about investing to people who could have been one of the 9. I think the mix was actually good; I don't think i'd change any requirements. But I would get a feel ahead of time for whether people were passive investors or active investors. In some sense it worked out that lots of people were looking at it more as a network and a portfolio diversification strategy, because if we’d had 99 people on every single call it wouldn't have been as easy to facilitate.
What kind of feedback have you had?
So far we've anecdotally talked to people, and done qualitative interviews about half way through at the Angel Capital meeting in the spring, and we'll be doing a follow-on survey once the program has finished to get more feedback. But in general feedback has been overwhelmingly positive, and most of the women say they want to do another one!
Is there anything different in how you approach working with entrepreneurs and meeting the companies?
Most of the companies come through our 9 lead investors, who are all actively participating in either one, two or even three angel groups, and most of the deal flow came from them. In terms of the companies, one of the main reasons they came to us (in addition to the financial capital) was who we were: a diverse set of nearly 100 professionals with different skillsets, experiences, and backgrounds. That was really appealing to most of the entrepreneurs, to get access to that level and depth of knowledge. One of the things we spoke about at our summit recently is how to continue to continue to add value to our portfolio companies as they continue to build their companies.
Is there a gender lens in either the way you approach due diligence or the company criteria?
We don't have a quota to invest in women-led companies, but clearly we're cognisant of the fact that diverse teams do better. So I think all of our companies except for one have women on the management team and more than half have women as the CEOs. So we're obviously sensitive to that issue. But it doesn't exclude an investment if they don't have women on the team.
What would you like to see happen long term, after people have gone through the program?
Hopefully they'll feel educated and confident of their capabilities to become active angel investors in angel groups, other funds, or independently. Regardless on how they invest, I hope they take the plunge and do invest. I hope they’ve learned how to best support the companies in their portfolios. And I hope they actively participate in the startup ecosystems in their local communities. Ultimately, I hope they’ve learned how to successfully create a diversified portfolio, support great entrepreneurs, earn attractive returns, and become leaders in the global entrepreneurial ecosystem.
What else is happening in the next 12 months?
We're moving very quickly on expanding the Rising Tide Program to Africa. We’ve begun launching syndicate networks in Nigeria and Cameroon and the fund will be launching in the early part of 2017. In Europe, there's a second Europe fund and at least one country fund coming up - Switzerland. We are now finalizing what’s next in the US and I’ll just say that it’s all about IMPACT: people, planet, profits. If folks are interested, they can email me at email@example.com.
After that we're looking at MENA, Latin America, and India and building out the Rising Tide Network across the globe.
Is there any new research Kauffman are doing to build on their female VC research?
There's been a few different studies on the gender gap in VCs, but if you look at the number of VCs and the number of VC deals, you're looking at 4,000 deals a year. If you look at angel investing in the US it's more like 75 or 80,000 deals and about 300,000 angels. So one way I think that we can reduce the gender gap on the VC side is creating a bigger and better pipeline of women who have equity investing experience.
Years ago Kauffman launched the Kauffman fellows program and I think most if not all of the diversity in the industry stems back to that, but it's clearly not enough. So after putting women into angel investing and helping the companies they invest in scale, a natural transition would then be to do VC financing later stage as they will have the skillsets to do that. I think we need a lot of different initiatives, but this is one that's going to help build the pipeline of women who can enter into the VC field.
Kauffman has funded a couple studies on this new model and I look forward to the research findings that will be presented next fall at the Diana Conference at the Kauffman Foundation in Kansas City. I see the Rising Tide Program as one important contributor in building the next wave of women investors!