University Of New Hampshire Creates Pipeline Of Women Venture Capitalists

Only 4.9% of venture capital partners in the U.S. are women, according to The Untapped Potential of Women-led Funds by Women in VC. Female VC partners are twice as likely to invest in startups with female founders, according to research by Kauffman Fellows.

No surprise then that when times got tough in 2020, due to the economic shock of Covid-19, male VCs retreated to their old habit of investing in male founders, but not female ones. As a result, 2020 was a setback year for female founders raising venture capital. According to Q4 2020 Pitchbook and NVCA Venture Monitor, the amount of venture capital raised in 2020 by startups with female founders on the team was at an all-time high—$22.1 billion—but the percentage of dollars was down from the record set in 2017—15.2% compared to 12.3% in 2020.

From All Raise to the National Venture Capital Association to Women in VC, various organizations have developed programs to address the underrepresentation of women as venture capital decision-makers. In 2005, Jeffrey E. Sohl launched a program for undergraduate students to create a pipeline of women with the skills and interest in becoming venture capitalists. Sohl is Director of the Center for Venture Research and Professor of Entrepreneurship and Decision Sciences at The Peter T. Paul College of Business and Economics at the University of New Hampshire (UNH).

As Kelsie Dawe and Aidan Kittredge show, it’s working!

A longtime UNH donor—Mel Rines, a former investment banker—reached out to Sohl about his work with angel investors. Was there a program Sohl could develop that Rines would fund?

In 2000, Sohl noticed that a small number of women attended his lectures on angel investing. Even back then, “they were a force that was making an impact on angel investments,” he said. In 2004, he started systemically tracking the number of women angel investors and angel investments in female-founded companies.

• The share of angel investors who are women jumped from 5.0% in 2004 to 29.5% in 2020.
• The share of female founders of all founders seeking angel investment surged from 5.0% in 2004 to 33.6% in 2020.
• The success rate of female founders raising angel capital climbed from 12.5% in 2004 to 28.1% in 2020.

The truth is that, in general, women are better investors than men, according to LouAnn Lofton, author of Warren Buffett Invests Like a Girl—And Why You Should, Too. Women spend more time researching their investment choices, taking less risk than men, and holding onto their investments longer. Women are also more likely to seek out information that challenges their assumptions. If you think about the success factors of angel and venture capital investors, it aligns with the typical style of female investors.

“You need patience to be an angel investor because your exits are eight to 10 years from your investment,” said Sohl. In soon-to-be-published research, Sohl reveals that men attribute their failures in angel investments to outside forces, such as the economy or the entrepreneur. Women attribute their failure to a lack of knowledge and, as a result, want to learn and improve. It is the latter behavior that leads to better investing.

Sohl came up with the idea of a student-run angel investment fund. The Mel Rines ’47 Student Angel Investment Fund is a $400,000 evergreen fund. Grounded in experiential learning, the Fund is a cross-disciplinary undergraduate program that allows students to learn angel and venture capital investment strategies through the first-hand experience of investing in non-NHU-affiliated startups.

Investments represent a wide array of industries. Startups must have high ethical and moral standards and be committed to the pursuit of excellence and diversity. Financial returns are meaningful, but as a young fund, it hasn’t had a liquidity event. Perhaps more important is how well the students perform in the projects they’re assigned and if associates go to get high-level internships and jobs due to the exposure to the program. Kittredge was hired as a venture associate sourcing and managing deal flow for a $200 million fund. Dawe will intern this summer as an investment analyst at Westriver Group.

The program only accepts about 15% to 20% of applicants. To encourage women to apply to the program, Sohl and his students conduct outreach. This past school year, 39% of associates in the program were women, and this coming year 45% are. The executive committee was 80% female this past year and 60% in the coming year. One-third of the Fund’s portfolio has female founders.

This past year undergraduates Kittredge and Dawe were the co-managing directors of the Fund. They worked to recruit partner angel funds to source deals from, then vet the startups for investment. While students do the due diligence and make recommendations on which startups to invest in, an investment committee of seasoned angel investors makes the final decision. The duo managed 30 associates, who are the students analyzing deals.

Kittredge just graduated with a degree in economics and business administration. She joined as a sophomore. The following year, she moved up to director of membership, responsible for recruiting associates and onboarding them. This past year, she assumed the role of co-managing director. “I didn’t even know that investing in private companies was a thing you could do,” she said.

Dawe is going to be a senior and is studying finance plus information systems and business analytics. She joined in her sophomore year and the following year became co-managing director. “I’ve had a steep learning curve,” said Dawe. She had wanted to be an entrepreneur, but she’s changed her mind. “I’ve come to love the investment side and aim to go into venture capital,” she said, “in a firm that values diversity.”

The pair used the pandemic to their advantage, developing a hybrid remote (via Zoom) and in-person model to hold meetings with associates. They expanded their geographic reach by partnering with a San Francisco angel fund, and now receive pitches from startups outside the New England area.