Why more female professionals should invest in early-stage equity

Kirsty Grant - Seedrs
Kirsty Grant - Seedrs
Kirsty Grant
Investment director
Seedrs
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The reckless caution of female investors means they are missing out on the long-term potential upsides of investing. 

We are in an era of low interest rates, poor bond yields and an uncertain macroeconomic climate and consequently, building a diversified portfolio of investments is crucial for your financial future.  Now, more than ever, investing in the equity of early-stage companies is an attractive opportunity with the potential for long-term financial rewards that could outweigh other asset classes. So, why are so few women investing?

Studies show that women are more likely to hold their savings in cash, rather than invest it. A poll by YouGov for Boring Money found that 50% of women had a cash ISA and only 10% had a stocks and shares ISA (almost twice as many men had a stock and shares ISA).

Reiterating this theme, Blackrock has released a report showing that millennial women are less positive about their financial futures and less engaged with investing than millennial men, instead focusing more on savings and managing debt, rather than investing for growth.

Is this understandable, are we just too busy, and are the barriers to entry too high? After all, we are time poor, bombarded with advertisements for financial products and frankly, investing can seem a little dull. Furthermore, historically it was impossible to invest in exciting startups and high-growth companies unless you are very wealthy and part of a network of angel investors or invest via a venture capital fund.

I would argue no. The innovation of financial services and alternative finance platforms like Seedrs make it possible for investors to self-direct investments of varying ticket sizes into high-potential businesses they understand, thus providing an opportunity to create a dynamic and diverse investment portfolio. This democratisation of early-stage investment makes it available to anyone with Wi-Fi, yet women are still not taking advantage to the same extent as male investors. Perhaps it boils down to educating on a previously mysterious asset class?

Investing in high-growth equities on Seedrs gives you exposure to potential high returns, significant tax reliefs and the chance to put your business picking skills to the test, here are a few pull-outs:

  1. Potential returns: The Seedrs portfolio AW16, showed an Internal Rate of Return (IRR) of 14.4% before tax relief, and 49.1% on a tax-adjust basis. In short, the asset class is outperforming many other asset classes available for your investment. Ladies – take note
  2. Significant tax reliefs – up to half your investment back: Women are leaving money on the table.  There is the potential to get up to half your investment back through tax reliefs, via the government’s Seed Enterprise Investment Scheme and Enterprise Investment Scheme, which were put in place to encourage equity investment in early-stage ventures.  The tax relief schemes mean that you can claim back 30%-50% of your initial investment in immediate tax relief for eligible equity investments, the investment is also eligible for loss relief and is exempt from Inheritance Tax and Capital Gains Tax
  3. Taking advantage of their unique evaluation abilities

As it turns out, women are better at picking female-led businesses. Sahil Raina, a professor at the University of Alberta, has released a paper that shows that female-led startups have a 321% greater annual likelihood of exit when financed by female VCs, compared to female-led startups financed by male VCs. One of the conclusions from the paper is that when female-led startups seek VC financing, female VCs are either better able to judge the startup’s future performance 

I would push this theory beyond the confines of gender: all investors bring with them a unique understanding or point of view, and each investor should use their special knowledge to their advantage. As the old adage goes, ‘invest in what you know’ (and the lesser known adage ‘it’s not just middle-aged men that know stuff’). 

Reports suggest that women tend to assume they know less about investing than others, even if that isn’t true.A 2014 report from Merrill Lynch found that 55% of women (compared with just 27% of men) agreed with the statement “I know less than the average investor about financial markets and investing in general”.

It seems that female investors are often in a unique position to understand and evaluate investment opportunities and they should be exploiting that advantage for their own financial gain. The Seedrs platform empowers investors to engage with a variety of businesses and choose their investments carefully, based on where they see potential.

This research also suggests that more female investors will lead to more successful female-led ventures, which is important for diversification of investment opportunities, innovation in female-focused products and services and, ultimately, the economy.

Many women cite lack of free time for why they are not more engaged with their finances.

Seedrs provides the online platform, so you can browse opportunities, engage with businesses raising funds and, put simply, invest from your desk.  Busy professionals just need to do the ‘picking’, while Seedrs takes care of the ‘boring legal stuff’.

As an active investor myself, I want to encourage other female professionals to think seriously about investing their money more actively across multiple asset classes. Whilst you should only invest what you can afford to lose into early-stage equity, you should jump at the chance to support ambitious and innovative businesses at the start of their journey and relish the opportunity to play a part in their success. This doesn’t mean just backing businesses led by female founders, but it means backing businesses with concepts you can relate to and believe in.

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