My Path to Becoming an Angel Investor

And yes, it’s very much a part of my world of social good

Five years ago I realized, thanks to a significant inheritance, that I had some serious disposable income on my hands. With no kids to put through college and a reasonable mortgage payment, I found myself in the position to do what I’ve always loved most: elevate the voices of women and help build organizations doing the same.

At first, I pursued these goals the traditional way, by donating to nonprofit organizations or volunteering my time. But as I began exploring my options for major donations, I came across organizations like Golden Seeds, 37 Angels and Natalia Oberti Noguera’s Pipeline Fellowship that offered an alternative approach: angel investing.

It had never occurred to me investing in businesses was another way to support and empower women, but after some research, I realized the approach actually suited me quite well. Through angel investing, I could harness my passion for helping other women make change, while supporting the wider movement to increase the number of women providing capital and expertise to early-stage companies. (Only 13 percent of today’s angel investors are female.) With such a low number, businesses are losing opportunities to gain from the unique skills that women bring to the table, including our ability to inspire collaboration and common ground among differing parties and helping businesses target the growing female consumer market. I wanted to change that ratio, too.

Only 13 percent of today’s angel investors are female...I wanted to change that ratio, too.

I set up meetings with passionate angel investors such as Fran Hauser, Joanne Wilson, Deborah Jackson and Laurel Touby to become familiar with the requirements to “play” and hear more about their investment strategies and philosophies. For instance, Deborah, who recently launched the crowd-funding site specifically for women, Plum Alley, explained to me that by supporting a female entrepreneur, I would effectively be creating more jobs for women — certainly a social good that I’ve always valued. Fran shared that as a funder, it provides her with opportunities to share much of the wisdom and expertise she has acquired from years in the media business. Soon after, I made my first angel investment, and the next four came easily. My portfolio now includes The Li.st, Lover.ly, Zady, The Muse and soon Modern Loss, each receiving investments between $5k and $25k.

Angel investing is indeed personal, allowing a far more targeted approach than traditional investing through mutual funds, stocks and bonds. The first thing I did when starting out was to determine my personal criteria: to fund only women entrepreneurs, to find those that are innovative and creating a unique product or service, and to support those that would benefit from my business network and advice. The priority for me has and continues to be investing in companies that are founded by women entrepreneurs whom I completely trust and believe in — people who I’ve had the chance to get to know personally and professionally. These are women whom I believe will fight fiercely to change the world through their companies and their platforms.

But this was just a starting point. As my portfolio has grown, my investment strategy has evolved as well. Rather than soley identify smart women whom I trust, I partner with founders who will welcome me in as an advisor, connect me with their other investors, and tap into my expertise. My goal is not to simply write a check and wait for the financial returns to come in, although that certainly would not be a bad thing should it happen! Instead, I want a seat at the table — the opportunity to share my business knowledge and experience. In fact, even if I break even or lose a bit of money, the companies in my portfolio have provided returns to me in other ways: tremendous introductions to fellow investors, invitations to exceptional events, the opportunity to get hands-on experience building a business from the ground up, and the chance to be part of something changing the industry, and quite possibly the world.

It’s good business to invest in diversity and places where diversity is valued. My goal is to be proof of that as an investor, advisor, mentor and team member.

-The great thing about angel investing is that you have the flexibility to shift and adapt your approach over time. I’m constantly learning from the other investors I meet as my criteria continues to crystallize. While my strategy stays rooted in supporting women innovators who can provide the returns I need, my goal going forward will be to look more closely at how these businesses approach hiring. I plan to look at the make-up of the board, the founding team and early hires to glean whether the company is serious about welcoming diverse voices and perspectives. This isn’t just for the social good of it –- the data proves overwhelmingly that diversity improves the bottom line. It’s good business to invest in diversity and places where diversity is valued. My goal is to be proof of that as an investor, advisor, mentor and team member.

My overarching investment strategy is to change the ratio of angel investors, of funded female founders, of their successful companies and hopefully of their even more successful exits. This is truly why I embraced angel investing from the beginning and the lens that I will use as I continue making investments in the future. We are living in a remarkable time when women are becoming a major force in business, in boardrooms and in our global economy. By supporting women entrepreneurs, I’m doing my part to help fuel such a movement.

Susan McPherson is a serial connector who believes business can be a force for good. She’s founder and CEO of McPherson Strategies, a social-good communications consultancy in New York City. She can be found often on Twitter at @susanmcp1.