It pays to invest in women-led start-ups – Golden Seeds’ McCarthy

6 May 2014

Loretta McCarthy, managing director of Golden Seeds

Loretta McCarthy is managing director of Golden Seeds, a US investor consortium that invests in early stage women-led start-ups, and counts many women investors in its ranks. Ahead of the EBAN congress in Dublin, she spoke to Ann O’Dea.

In existence since 2005, Golden Seeds manages a nationwide network of more than 300 angel investors, making it one of the largest angel investment organisations in the US.

“When we started out, in the US women were starting about half of the businesses, yet they were getting less that 5pc of the capital that was going into new businesses,” McCarthy explained. “It seemed clear that that they were either not being given the opportunity, or were not taking the opportunity to determine how to fund their businesses in a substantial way.”

So came about Golden Seeds, which has in the last 10 years invested some US$62m in more than 60 companies. “We decided that we would create an angel investment group that would focus solely on funding companies that were being led by at least one woman, with the aim of proving that these companies can do as well – or better – than other companies.”

Because it invests at early stage, it is not difficult to assess whether the start-up is genuinely being led or partly led by a woman, said McCarthy. With headquarters in New York, Golden Seeds today has chapters in Boston, Texas, and Silicon Valley, California, and boasts more than 300 members.

While it is agnostic with regards to geography and has so far only invested in US companies, McCarthy said it is open to looking further afield. Golden Seeds is also agnostic with respect to industry sector. “However, what we are not agnostic about is the company being solely or partly led by a woman.”

One of the reasons McCarthy is coming to Europe for the EBAN congress is to spread the word, she said. “We regularly get enquiries about this sector, and about ‘why women, why it’s different’. So it was a great opportunity to talk to angel investors about this. We believe that any angel investment group that isn’t in some way looking at women is missing this opportunity.”

She also pointed to reams of research that today concurs gender-diverse boards of directors and management teams ultimately produce better results for investors.

“At Golden Seeds we want to be gender diverse, because we believe that having all points of view represented in the decision-making is important. We often speak with other angel groups in this country and outside of this country to reinforce the importance of having gender diversity in all aspects of our business.”

Women investing in women

What is particularly interesting about the growth of Golden Seeds is the number of women investors.

“It is one of the things that has delighted us about our growth in the US – that women have joined us as members in very large numbers,” said McCarthy. “Of our 300 members, 80pc of them are women. There’s a natural affinity that women are going to be attracted to this organisation that happens to be focusing on other women.”

More than that, it also demonstrates that women have reached a point in time where they have the capacity to do this kind of investing, said McCarthy. “Women have accumulated enough wealth and enough skills and confidence to be able to do this investing,” she said.

“When Golden Seeds was started in this country, women represented about 7pc of angel investors, and at the time there were about 200,00 people who self-identified as angel investors. Today there is something like 275,000, and 22pc of them are women,” she said.

“We are quite thrilled that women have jumped into this world of angel investing and they are serving on the boards of these companies and mentoring them. By having both men and women participating in the process what you get is a broad range of concepts, discussions and collaborations.”

It really is important that angel groups look to have that gender diversity, said McCarthy. “So many of the companies that we see are being created for women as consumers.

“The same applies to age diversity – a lot of the products are being created for people of a certain demographic.”

In this context, diversity just makes good sense, according to McCarthy.

“Golden Seeds doesn’t want to be one of the few groups that has a lot of women investors,” she said. “We want all groups to have women as investors.”

The data points vary, but McCarthy said that in 2012, of those companies applying for funding in the US, some 16pc were led by women.

“And when women do apply for funding, they have a higher success rate achieving funding through that process than organisations that are led by men.

“That’s only by a slight margin, but if only 16pc of the companies applying are led by women, our conclusion is that there are a lot of companies being led by women that are not seeking outside capital. So we are urging women to think about growing great businesses that will become large and that have a need for outside capital.”

Loretta McCarthy will address The EBAN 14th Annual Congress and 9th Annual Awards, which comes to Dublin Castle from 19-20 May, with the theme ‘The Power of the Collective: Business Angels, Seed Funds, Accelerators & Incubation Space’. You can register for the event here.

Women Invent Tomorrow is Silicon Republic’s campaign to champion the role of women in science, technology, engineering and maths. It has been running since March 2013, and is kindly supported by Accenture Ireland, Intel, the Irish Research Council, ESB, Twitter, CoderDojo and Science Foundation Ireland.

Ann O’Dea is the CEO and co-founder of Silicon Republic and the founder of Future Human