Angel investing is ‘a window to innovation’ for economy, expert says

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Recent indicators show that women are increasingly eager to put their money to work outside of traditional portfolio offerings. 

For instance, women accounted for 31.2% of angel investors in the first two quarters of 2022, a slight increase from 30.3% in the same period in 2021, according to a report by Jeffrey E. Sohl at the Center for Venture Research at the University of New Hampshire. 

This is “an encouraging sign that women angels are an increasing active segment in the angel market,” especially as women are predicted to control the majority of the net worth in the U.S., the report said.

If you have the money and inclination, angel investing is “a window to innovation across the economy,” Jo Ann Corkran, co-CEO and managing partner of Golden Seeds, said Thursday at CNBC’s Financial Advisor Summit.

It doesn’t depend on the market cycle and innovation is always happening, she added.

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However, here’s the issue: Women don’t take enough risk when investing, said Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments, at the summit.

Unlike venture capital firms, angel investors make their own decisions and use their own wealth in a start-up’s initial stages, said Corkran.

“It’s a way for people to use their money, skills, experiences and networks to help companies that are in their own portfolios,” she added.

Here’s how advisors can better position clients to take advantage of this growing woman-led market opportunity, according to angel-investing experts.

How to help clients become angel investors

Financial advisors ought to keep angel investing in mind for clients as an option over portfolio investing because it has one of the highest rate of returns across all asset classes, said Corkran.

Over the long term, angel investing can bring a 25% to 35% in internal rate of returns (a metric used in financial analysis to estimate the profitability of potential investments), she added.

As women are projected to own as much as $93 trillion in assets globally as of this year, according to Boston Consulting Group, it’s in advisors’ best interest to engage female clients, said Tengler.

Research shows that two-thirds of women tend to lay off their financial advisors after becoming newly single, whether through divorce or by being widowed, she added.

Other studies have found women do about 60% more research and outperform male counterparts as investors, said Tengler.

Financial advisors can help their clients become angel investors by sharing resources on how to become familiar with risk by following these two practices:

  1. Join an angel investing group: There are about 250 angel groups across the U.S. that work with different areas and sectors, said Corkran. Many offer training for new members on how to perform due diligence and risk assessments, she added.
  2. Familiarize yourself: Enroll and subscribe to different associations that provide critical, original investor research, said Corkran. Moreover, read from industry and business publications weekly, said Tengler. “Start familiarizing yourself with the process and companies,” she added.
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