Every year, I meet thousands of women who want to become investors, but they don’t know where or how to get started. That’s why, today, I want to talk to you about female investment funds. These are the best way I know of to begin investing in women-owned businesses, especially if you aren’t yet an accredited investor. I’m going to tell you all about what a female investment fund is and why you should consider investing using one whether you’re a new or seasoned investor.
A female investment fund, also known as a women’s investment fund, is a fund that is created for the sole purpose of investing in women-owned businesses as an equity partner. Instead of investing your money in one company, you invest in multiple companies with the same dollar amount of investment.
With a single investment, investors create a diversified portfolio of several companies, which mitigates risk for investors and increases the chances that your investment will pay off when one or more companies take off.
Who Can Invest in a Female Investment Fund?
All investors who want to invest in women-owned businesses can become part of a female investment fund, regardless of whether or not they qualify as accredited investors. This gives opportunities to female investors who may not meet the qualifications to be eligible to invest as an angel investor. It also opens doors for entrepreneurs who need investors to help start and scale their business but don’t have access to angel investors.
I’m a big fan of female investment funds for several reasons. First, female investment funds can make it less risky for you to invest because your money is spread out over multiple companies.
Second, female investment funds save investors a lot of time, and, as we all know, time is money. Investing by way of a female investment fund less time consuming than making a direct investment because you don’t need to take the time to meet with company founders and founding teams. You also don’t need to review financial statements and business plans.
Finally, female investment funds make a direct impact on women-owned businesses. I’m as passionate about helping women business owners succeed as I am about helping women become wealthy investors. Female investment funds accomplish both of these.
How to Invest in Women-Owned Businesses
When you’re looking for companies to invest in, you should absolutely consider investing in women-owned businesses. You’ll be doing more than just helping other women succeed (which is, of course, extremely important to me and other women entrepreneurs and investors around the world). You’ll also be more likely to see a generous return on your investment.
Women business owners are more likely to create a return for their investors than male business owners. Studies have shown that investments in companies that had at least one female founder performed 63% better than investments in companies that were led by all-male teams.
It’s not enough to just close your eyes and pick a woman-owned business to invest in. Understanding how to successfully invest in private female-owned companies as a private investor and partner take some time and effort. In addition to understanding the business operations of the company you want to invest in, you need to have some business knowledge, like how to read a balance sheet and how to tell if a founding team has what it takes to succeed and return a profit to investors. You’ll need to meet with the founders and ask them tough questions about their business plan to validate it and determine whether they truly have what it takes to win.
Investing in a female investment fund takes out a lot of the legwork, which can help you learn more about what types of companies you want to invest in and which types are most likely to succeed.
Of course, there’s always a level of risk involved when you invest in a private company. That’s why we call this type of investment, “high-risk, high reward.” It’s also why I strongly encourage all investors, especially new investors, to invest through a female investment fund to mitigate some of the risks involved with female startup funding.
Mitigate Investment Risk with a Female Investment Fund
Investing in women-owned businesses through a female investment fund does more than just provide opportunities for non-accredited investors to invest in women-owned businesses. It also mitigates your investment risk by diversifying your portfolio.
Here’s an example. Let’s say you have $25,000 to invest. You have done your homework and decided to invest it in a female startup. But then, something unexpected happens that causes the business to fail. Because the startup has failed, you have failed as an investor. You’ll never see that $25,000 again. In an instant, it’s gone.
As a new investor, that is a lot of money to have spent on a project that went nowhere. It might take you months, or even years, to build your savings up again. The situation might end up turning you off completely from the idea of ever investing in another startup or business, causing you to miss out on opportunities to build wealth and contribute to a growing business venture.
Now, let’s say that instead of investing that $25,000 in a single company, you instead invested it in a female investment fund, which funds multiple companies, including that one business that ended up failing. This time, when the business fails, it’s just one of several companies that you have invested in. So, you won’t lose your entire investment because other companies are thriving, thanks in part to your contribution.
With a female investment fund, you can still build wealth, even when a business fails. At the same time, you can have a tangible way to measure the success of each company that you’ve invested in so you can have a better understanding of which types of businesses you do and don’t want to invest in in the future.
My goal is to create a community of successful female investors who can build personal wealth by supporting the success of growing women-owned businesses. I believe that when we work together, anything is possible.