Finding their wings: Boston's female angel investors put women first - Boston Business Journal (2024)

Barbara Clarke’s journey to become one of Boston’s most active individual startup investors began with a Google search for “angel investing Boston.”

The search results showed a handful of decade-old organizations, where monthly meetings would feature a group of rich people invited in to hear pitches from local entrepreneurs. After a lengthy vetting process, individual group members would choose whether and how much of their own money to invest. Usually, these individual investors — the “angels” — write a startup’s first checks, investing between $10,000 and $250,000.

But to Clarke, the process looked slow, the startups looked boring, and the group members were too white and male. She described the whole Boston tech scene as too “provincial.”

“It just didn’t seem like something that would work for me,” Clarke said. So in 2013, Clarke joined one of the first cohorts of a New York-born organization called Pipeline Angels, a learn-by-doing program that teaches women to be angel investors and connects them with startups founded by female entrepreneurs.

Now Clarke is among a new generation of prominent women in Boston who are trying to shake up the world of early-stage investing. The movement comes in the wake of two nationwide trends: that of U.S. women controlling more personal wealth than ever before, and that of tech startups that increasingly find success by going straight to everyday consumers, making the industry-insider knowledge that many VCs offer less relevant.

The convergence of those trends may allow women — who are often shut out of the institutional venture capital game as both investors and entrepreneurs — to bypass traditional gatekeepers to the tech industry and redefine how successful tech companies are built.

Besides Pipeline Angels, another female-focused angel organization that held its annual investor summit in Boston last month is called Portfolia. In the past several years, those two groups have minted 45 new angel investors in Boston and have put at least $425,000 into six Boston-born startups. Investors connected to Pipeline and Portfolia have gone on to invest additional capital on their own and expect to become even more active as they start to see returns on their earliest investments.

The new generation of female angel investors are building on the work of women like Boston-based Jean Hammond, one of the country’s most successful angel investors, and Golden Seeds, an angel network founded in New York in 2005 and also focused on female-led startups. But several of the women involved in Pipeline, Portfolia and other new angel organizations believe we’re now at the beginning of a period of more radical change in early-stage investing.

“VCs are being disrupted just like all kinds of other industries are being disrupted, and they’re doing all the same things incumbents do because we’re small right now,” Clarke said. “They don’t really feel threatened.”

Investing in the future

Most people in the tech world are familiar with statistics like this: only around 7 percent of venture capital investors are women, and just 2 percent of venture capital dollars go to companies led by all-female founding teams.

But here are a couple of other numbers: Women control 51 percent of all personal wealth in the U.S., totaling $14 trillion according to a 2015 report from the BMO Wealth Institute. And 30 percent of angel investors who started investing within the past two years are women, according to a 2017 report from the Angel Capital Association.

Trish Costello, the founder of San Francisco-based Portfolia, believes the influx of women angels represents an opportunity to redefine startup investing in a way that benefits both underrepresented founders and consumers generally.

As women increasingly control the family purse strings, they look for products and services that fit their specific needs in areas like health care, caregiving and retail. Costello says the best designers of those products are unlikely to be 35-year-old white males with an MBA and a few years’ experience in investment banking.

“There’s a misalignment now,” Costello said. “The people who are building products don’t necessarily understand the customer, and the investor doesn’t necessarily understand the customers.”

Helen Adeosun ran into that fact headfirst as she tried to raise money for her Cambridge-based startup, CareAcademy, which provides employee-training resources for home care agencies. Adeosun said many of the VCs she talked to, often men, had clearly never encountered the struggle that comes with arranging care for children or elderly family members.

“Questions would come up that just reflected that they did not have the background to evaluate anything to do with caregivers,” Adeosun said. “Until you encounter it, you don’t know how fragmented and how truly in need of clarity the process is.”

When Adeosun pitched Barbara Clarke and the rest of her Pipeline Angels cohort, by contrast, she found the women quickly grasped CareAcademy’s potential, both as a business and as an organization that would make people’s lives better. Clarke led CareAcademy’s first $40,000 round of funding and has continued to invest in subsequent rounds, including a $1.7 million round last year led by New York-based firm Rethink Education.

For many of the women involved in Pipeline and Portfolia, making money and making a difference are intertwined. Take Lisa Frusztajer, a longtime tech executive who is now the lead investor for a Portfolia fund aimed at enterprise technology startups. She’s also an investor in CareAcademy, as well as in Cambridge-based Solstice, a startup that helps bring solar energy to households that wouldn’t otherwise be able to afford it.

“It’s investing with a mission,” she said. “And that just feels so good.”

Traditional VC firms are waking up to the possibilities of mission-focused investing. Last year, Boston’s Flybridge Capital set up a $3 million fund to be invested into female-founded companies and chose eight women entrepreneurs to make the investment decisions.

Cambridge-based Accomplice is now doing something similar. Although it’s not focused specifically on female investors or entrepreneurs, Accomplice has set up a $35 million fund called Spearhead, and selected 17 current entrepreneurs to dole out the money. Sarah Downey, who is leading the Spearhead initiative for Accomplice, said many women executives at tech startups already have the skills to be good angel investors — they just need new networks and educational resources.

“Angel investing has this connotation for being a rich old white man sport,” she said. “It has been, but I think things like AngelList have really opened up the black box.”

A new mission

Before founding Portfolia, Costello spent two decades at the nonprofit Kauffman Foundation, leading a program to train VCs and angel investors. In the early 2000s, she would have said the world was on track to see an explosion in female venture capitalists, but it “just didn’t happen.”

Costello came to believe that she need to not just train women to succeed in the traditional venture capital world, but to create a different type of investing altogether.

“I really saw it as a design challenge,” Costello said. “We needed to stake a step back and look at how women like to invest.”

The resulting structure of Portfolia, which shares many design elements in common with Pipeline Angels, emphasizes learning and collaboration among investors. The minimum check size to participate in a Portfolia fund is $10,000, much lower than in other angel collectives or micro-VC funds. That investment will be spread out over many startups, allowing new investors to see the process play out multiple times with a minimum of financial commitment.

Betty Francisco, who has participated in both Portfolia and Pipeline Angels, is a former corporate lawyer who frequently worked with VCs on legal intricacies of their investments. When she wanted to start investing herself, she had trouble finding somewhere to learn how investors identify and evaluate such deals in the first place.

“It’s unheard of typically that you can be a part of all the pitches,” she said. “It’s more what you want. I wanted a community.”

It’s not yet clear what this women-led, community-focused approach to startup investing will mean for the tech and venture capital industries overall. Organizations like Portfolia and Pipeline represent a tiny fraction of the overall private equity market, but they’re already expanding fundraising opportunities for entrepreneurs who might otherwise struggle to raise capital.

The startups this new generation of angel investors is supporting already look starkly different from the portfolios of other early-stage tech investors, with a heavier focus on female healthcare, education and technology that supports senior citizens.

If a few of those bets pay off in coming years it could spur others to put their checkbooks, not just their rhetoric, behind the idea that diversity is good for business.

“I’m motivated in this investing because I want to invest in the world I want to see, but I also believe it’s a really profitable world,” Clarke said. “Boston is really missing out on a lot of it.”

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