Published on May 27th, 2017 | by Nancy F. Clark0
How You Can Make Money Helping Women Make Money
By Suzanne Andrews—
Women are a great investment. They build the same size businesses as men do with one third-less capital, making women a better return on investment.
Yet, women business owners don’t get as much funding as their male counterparts. This situation creates overlooked investment opportunities for those of us paying attention.
There are many ways investors can support women business owners, and potentially make good money at the same time.
Give Your Money Wings
One exciting area to look at is angel investing, where you invest your own money in high-potential startups in exchange for stock in the companies. This is a high-risk investment available to those with the wealth profile that qualifies them as an accredited investor. Angel investors know that they will lose many of their investments, so they choose a portfolio strategy that maximizes the chance that a few of their companies will grow very large and balance the risk.
If you would like to find women-founded companies to invest in, check out organizations like SheWorx, Plum Alley, Golden Seeds, and Astia. New regulations allow non-accredited investors to invest in companies for equity, through online platforms like Republic, where you can even join a Women 2.0 investor group.
Small Investments, Big Impact
Microloans are on the other end of the investing spectrum. New businesses around the globe in developing economies often need only as little as $25 to get started. When you make your microloan on a platform like Kiva, you can choose to lend to a woman. As a Kiva lender, you don’t make a profit, but once your loan is repaid, you can re-lend the money to another business. In this way, your philanthropy dollars can be used over and over, in effect having a positive impact on your personal bottom line.
Angel investing and microloans are two well-known ways for individuals to invest in women-owned companies. These vehicles address the needs of very high-growth and very small businesses. In between, there are many small to medium sized businesses (SMBs) being started by women that also need capital.
Be Smarter Than Your Bank
You can personally make loans to women-owned businesses that you believe in and want to support. SMBs typically apply for loans from banks or from the SBA (Small Business Association). However, these loans have stringent requirements for their borrowers, and women (as well as minorities) sometimes experience discrimination. You and your investee can agree on terms, repayment schedule, and an interest rate, then set up your promissory note.
Loans work well for businesses that already have revenue to cover repayment. Since SMBs are less volatile than early-stage high-growth startups, and repayment begins immediately, this investment is less risky than angel investing.
Share the Joy
Another model is a revenue share. In this case, the investor takes a share of business profits, but not stock ownership. Similarly to angel investing, this model aligns the interests of investor and the founder since both parties benefit from the company’s success. Founders First Capital Partners (FFCP) is a new business growth accelerator that offers a revenue share opportunity to investors with a return of 1.67x. Payments begin immediately after the investment, and are completed in approximately 5 years, depending on the pace of the revenue stream.
FFCP invests in high-potential business owners from underserved groups (including women). They are the first accelerator to offer growth capital to revenue-generating startups in the form of revenue sharing rather than equity, and the first to use this proven revenue-share model to address the capital needs of underserved business owners. This is an exciting option for business owners that don’t want to or are not in a position to give away ownership shares of their company.
For angel investing, loans, and revenue sharing, you invest directly in a founder with whom you have a personal relationship. Some other avenues are mutual funds and CDFIs, which are less personal, provide a lower risk/return profile, and can balance your overall personal portfolio.
Look Through the Gender Lens
Many people use mutual funds as reliable investment vehicles for their savings. Increasingly, investors want their investments to match their personal values, and may practice gender-lens investing. For example, The Pax Ellevate Global Women’s Index Fund (PXWEX) is a mutual fund that invests only in companies that are highly rated in advancing women’s leadership. Compared to investing directly in individual companies, mutual funds are relatively stable, depending on the activity of the markets.
Be an Early Adopter
CNote is a brand-new financial technology that offers an alternative to bank savings accounts. Banks give you very little visibility into how they invest your savings. In contrast, CNote invests your money in CDFIs, which provide affordable business loans to community businesses, specifically investing in women, minorities, and low-wealth entrepreneurs. You can expect a 2.5% return on this low-risk investment, as compared to the typical 0.06% on a bank savings account.
You Can Use All of Your Money to Support Women
This article outlines a range of investment vehicles that allow you to make money while helping women launch businesses and make money. As Cat Berman, Co-founder of CNote says, “Finally – finance we can be proud of!”
Suzanne Andrews is Founding Partner of Wingpact, and co-author of Impact With Wings: Stories to Inspire and Mobilize Women Angel Investors and Entrepreneurs, the historic first book about angel investing for women. Suzanne writes and speaks about women investing in each other and women’s innovations in business culture.
The information provided in this article is for informational purposes only. It should not be considered financial advice. You should consult with a financial advisor or other professional to determine what investments may be best for your individual situation.
Article Photo by #WOCinTechChat