Loretta Mccarthy: [00:00:00] However, In 2004, of the 50,000 companies that got angel funding that year, only 3% of them were led by a woman.

Andrew Kazlow: So, at 3% in 2004, where would you say that stat sits today?

Loretta Mccarthy: It's somewhere between 25% and 30% of the angel funded companies are led by women.

We found that women from all over the country were flying into New York to meet us for coffee because they heard that somebody in New York was beginning to fund women.

Angela Allen: I personally joined Golden Seeds because I love the idea of supporting women entrepreneurs. I love being able to invest in deals and deal flow across the country. I'm excited that we'll bring money from both coasts into the Chicago market.

Loretta Mccarthy: We were very motivated by that ethic that said: This is an underserved population and we can do something about it. We have the skills ourselves to be able to do this.

I mean, we often will say we're agnostic about geography and we're agnostic about [00:01:00] industries, but we are never agnostic about women.

Andrew Kazlow: Welcome to the Diligent Observer, where we help angel investors see what most miss. I'm your host, Andrew, and every week we explore what works, what doesn't, and why through conversations with experienced startup investors and operators.

My guests today are Loretta McCarthy and Angela Allen from Golden Seeds, the largest angel network in the US investing exclusively in women-led companies. Loretta serves as Co-CEO and managing partner, bringing executive experience from OppenheimerFunds and American Express, and has been with Golden Seeds since nearly the beginning.

Angela, a veteran C-Suite operator, serves as managing director and founding member of the group's newly launched ninth chapter in Chicago. Golden Seeds members have collectively deployed nearly $200 million across more than 260 companies over 21 years, and they've helped fuel what I think is a remarkable shift from just 3% of angel funded companies [00:02:00] being women led in 2004 to nearly 30% today. In this episode, they share due diligence lessons on evaluating market demand over product excitement, explain the documented bias and how female founders get questioned differently during due diligence and discuss why joining an angel group can accelerate learning so much. I hope you enjoy learning from Loretta and Angela as much as I did.

Loretta, Angela, thank you for being with me today.

Loretta Mccarthy: Thank you for having us. Great to be with you.

Angela Allen: Yeah, it's a pleasure.

Andrew Kazlow: Well, I'm very excited to have you both on the call today. Um, and I'd love to start with, for each of you, what are you excited about right now? Let's start with you, Loretta.

Loretta Mccarthy: Well, as you know, Andrew, we at Golden Seeds, we invest only in companies led by women. And one of the things that we are the most excited about recently is that we have just started a Chicago chapter, which has been coming for a long time, and it got [00:03:00] sidelined slightly due to COVID, but we are back. Really attracting a lot of interest. So it is by far one of the most exciting things going on for us right now.

Angela Allen: Yeah, I, You stole mine, Loretta, and obviously as a, a founding member of the Chicago chapter based here in Chicago, um, we couldn't be more excited to finally be at the right time. Um, both in terms of having a few of us. That have that time and energy to, to invest in building the chapter out, but also just feeling like the momentum here is great. We did a soft launch internally in, in May with our own community and then started over the summer recruiting and we're, we're up to around 15 members already in the Chicago market, so we are just thrilled to be getting off to a really good and fast start here in Chicago.

Andrew Kazlow: So, walk me through the evolution. It sounds like this has been a long time coming. How did the Chicago community get started? What, what was the sidelining that you mentioned and, what kind of pushed [00:04:00] you all over the edge to actually go through with the, the launch in recent months?

Loretta Mccarthy: Uh, maybe I'll just start with some of the origin story of Golden Seeds. I'll quickly mention that it was actually 21 years ago, 2004, when we decided that the time had come for, for some group, and it became us to focus on the remarkable innovations that women entrepreneurs were doing all over the country. But we did realize early on that in order to find those companies, we needed to have a presencein in many locations, and in order to get to know the people who run the angel groups and the incubators and the accelerators and the universities that are, that produce entrepreneurs all over the country. And we also knew that women entrepreneurs were most likely to create their businesses where they live and have their many other obligations. So, it really drew us to do something that is really rare in angel investing and that is to create a [00:05:00] nationwide group. And I'll kind of turn it over to Angela now about Chicago, but it has, um, this is our ninth, ninth chapter and we are really thrilled about it.

Angela Allen: Um, yeah. So, we've always felt like Chicago was a great market for Golden Seeds, and when I joined in 2020, 2021 era, I couldn't believe we didn't already have a chapter here. And I think that, that most members felt the same.

So, um, that's, um, you know, in the past and rear view mirror, uh, and in the last couple years we've had a couple other members, um, join and move to Chicago and we felt like we finally had the critical mass of people to put the time and energy in, to reinvesting in those relationships that, that Loretta mentioned. And just, you know, getting out there and making noise and, and, and making sure people knew we were here.

Andrew Kazlow: So, Loretta, I'd love to come back to you in just a minute about the broader growth of Golden Seeds, but before that, Angela, tell me more about the local ecosystem. What, where is the energy?

You know, the [00:06:00] 15 of you that are launching this new chapter, you are in the midst of a lot of wonderful historical innovation, entrepreneurship in that area.

So, so tell me a little bit more about what's exciting to you locally and where you all are, uh, finding these pockets of, uh, innovation.

Angela Allen: Yeah. And mind you, we're still just getting started and still just breaking the ice on all of this. But it's been amazing. We were able to close, um, two deals from the Chicago market just this summer, right alongside all of our, um, growth and, and launching the chapter. Uh, we made an investment in a company called NanoPattern, um, which we learned of through, uh, other angel groups that we connect with, um, in the Midwest.

And we also, through our networks with Northwestern University, um, we're able to connect with Every Body Eat which is another, um, local company based in Evanston. That's, um, bringing forward some snack products to the market that are void of the 14 most common allergies and allergens. So, I think in [00:07:00] part it's just been through our own network as we're starting to, to move ahead the, the educational community. We've just got so many great universities, you know, Northwestern, U Chicago, just to name a few Loyola, uh, DePaul. And so, I think the community here, for entrepreneurship is very strong, um, with the foundation of highly educated folks, and there's just been a very, um, committed emphasis with 1871, which is an incubator here, and, uh, mHUB and many other groups that have really invested in the entrepreneurial community here for decades.

So, uh, it's a very mature market and we feel like there's just room for, uh, more resource here, more support. And I personally joined Golden Seeds because I love the idea of supporting women entrepreneurs. I love being able to invest in deals that, um, and deal flow across the country. And with opening a chapter here in Chicago, I'm excited that we'll bring money from both coasts into the Chicago market and we'll also [00:08:00] provide an opportunity for women and, uh, and, and men who are supportive of our, our mission here to invest in companies both in Chicago and beyond.

Andrew Kazlow: Well, Angela, I love that you're, you're talking about the centrality of the mission. One of the themes that I've been thrilled to be able to cover with numerous guests on this show in recent months is this funding gap in the women-led business world. And it's just been so encouraging to me to see the level of excellence and engagement focused on solving that specific problem over the last couple of decades.

Now I've only been in the space for a few years, so, uh, Loretta, my next question is for you. I wonder if you could share more about how the ethos and engagement around this problem has changed over the last 21 years since Golden Seeds got started. 

Loretta Mccarthy: Such a great question because in a way, in many ways, what we're doing here is running a [00:09:00] movement, you know, a movement to draw attention to the amazing things that women entrepreneurs do. And, any movement has its moments where it has inflection points where you, and I will say at the very beginning, and I was here at the beginning 2005. There were a lot of skeptics because we would go to industry events and explain that we were going to invest only in companies led by at least one woman. And there were plenty of people that were really questioning whether, there were enough opportunities to create an entire group around that, and it didn't take long for us to prove that, that the amount of deal flow that we started to see from very impressive women ramped up very quickly. But it was, that was a moment in terms of realizing that we, that we were dealing in a world that had been quite male dominated for a very long time. In fact, when we started Golden Seeds, 95% of all angel investors were men. [00:10:00] Women really were not participating as angel investors. So, they were very accustomed to investing principally in men. Often men who had done it before, serial entrepreneurs, and a lot of women who were starting businesses were less, they were less likely to be serial entrepreneurs. So there was a lot of learning that had to go on. Eventually, I think people started realizing that, this should, none of this should surprise us when you think of the level of education and skills and credentials that women have been now accumulating for decades.

So, why would we ever be surprised that they are showing up as entrepreneurs with really great ideas? However, in 2004, of the 50,000 companies that got angel funding that year, only 3% of them were led by a woman. And that just means that on that side of the equation, women also were not thinking in terms of how to go into the marketplace, raise capital for their companies.

And a lot of [00:11:00] the companies that were being started were women-led, but they just weren't in the marketplace, kind of working the system. Like many women have now learned to do. So, I would fast forward over all of these years, I mean, we've now invested, we're getting close to $200 million of investment in women-led companies.

So, I would say now, particularly when we reached our 20th year last year, we really thought this is now a mature movement. Meaning it has the characteristics of it's no longer doubtful about whether women can do some great innovation. We've all had some substantial successes. We've had our failures, just like angel investors always do. But it has, there's a level of, uh, understanding of the full range of what women are doing in every imaginable sector now. So it, there is no longer a question, the case at the beginning of whether women [00:12:00] only innovated in a small number of sectors. That's absolutely no longer the case. Women are really in every possible industry and every possible sub-sector within those industries.

Some of them are industries that we didn't know anything about just years ago because the industries themselves have emerged. So, it's really thrilling to see, to have been riding the wave of all of this and also being at the forefront. We are amazingly proud of the role that we have played. We, we are by far the biggest angel group that invests only in women, and when we started, we were really the only, only one, maybe one or two others came along shortly thereafter. And now there are quite a lot of funds that invest only in women. There aren't so many angel groups that do this, but it is, and we say the more the merrier. We want as much company in this movement is possible because what is absolutely true is the [00:13:00] pace at which women are starting businesses that deserve funding is much bigger than the available capital.

So we really urge people to join us in one form or another.

Andrew Kazlow: So, at 3% in 2004, where would you say that stat sits today?

Loretta Mccarthy: It's somewhere between 25% and 30% of the angel funded companies are led by women. It's, some of that data is a little hard to capture, but it's somewhere in that range. What that does mean, let's call it 30%, it does mean that 70% of the companies are all male teams that are getting funding So you ha you know, and so we can't totally declare success, but the progress has been huge. And we've, we've learned that if we just had the opportunity to introduce some of these amazing women-led companies to other angel groups and vice versa, they're sending companies to us. It's good for everybody and so it's no longer a novelty for a woman to be in any of [00:14:00] these angel groups pitching their businesses, you know, they've gotten really good at it and they're being successful.

Andrew Kazlow: That's just incredible. I mean, 10x in, in 20 years, that's what we wanna see, right? That's what this is all about. I'm curious, Loretta, we'll start with you. I'm curious, think back with me to the original kinda strategic decision making on how to grow this community. I've seen angel groups choose, you know, a variety of growth trajectories.

Some prefer to grow a central organization and kind of keep it localized. Others prefer this, um, chapter approach. And so I, I'd love to hear maybe the um, origin story of how you all kinda settled on this strategic approach of this chapter-based, kind of local community-based model. And then, after that, Angela, I'd love to hear how you've seen that be effective in your, in four or five years now being a part of the community.

Loretta Mccarthy: It's pretty simple for us in a lot of ways. First of all, it was all motivated by this gap that we recognized. Uh, those of [00:15:00] us who were the founders of Golden Seeds and we were all in New York and are still in New York, we, we had, Wall Street backgrounds and we were very accustomed to being the only woman in the room, often in our organizations.

And first of all, we were very motivated by that ethic that said: This is an underserved population and we can do something about it. We have the skills ourselves to be able to do this. One of the moments for us, at the very beginning when you were asking kind of about the origin story, one of the moments for us is that within the first year, we found that women from all over the country were flying into New York to meet us for coffee because they heard that somebody in New York was beginning to fund women. And that was when we realized that, first of all, we're onto something really huge here. But we also thought, this is ridiculous. They should not be flying to us. We should have feet on the street around the country where we can meet those entrepreneurs, [00:16:00] and really get to know what is going on everywhere else. So it became pretty evident early on that we needed a way to kind of spread the word about this all over the country. And then we realized that women are doing such remarkable things in many industries. We thought, all right, we have to be agnostic about industries as much as we can. So, we started attracting members who could help us evaluate companies in healthcare and in deep tech and other fields, climate that have been less associated with, women. And so, we, you know, that's been part of our journey is to say, get the expertise in-house to help so we can evaluate these companies. So, that's really, I mean, we often will say we're agnostic about geography and we're agnostic about industries, but we are never agnostic about women.

Angela Allen: I think from my vantage point, having joined, um, you know, four or five years ago, like, [00:17:00] I joined the New York chapter at that time because we didn't have the Chicago chapter. And like Loretta said, you know, like the community, I was able to participate virtually in a lot of things, but felt like we were missing that.

So for me, on the member side, one of the other things that's really interesting about Golden Seeds is just how approachable we make angel investing for members. I'd say about 80% of our members are women, so we have 20% of our members who are not. But a lot of people feel like, oh, I have to have a certain, you know, a amount of, of portfolio size or I've gotta know what I'm doing.

Or there's just a, an intimidation factor to take the leap and jump into angel investing even for people who absolutely qualify to have, um, angel investing in their portfolio and want to. And so what I've found is just being able to do the work with a community. And locally for us, as we're kind of getting started here, just being able to get together and debrief after we have our pitches and, you know, talk about it and work together on due diligence [00:18:00] teams.

Um, really also demystifies the whole process and makes it a lot more approachable for people. So, I think that's another element around. The local community aspect to having chapters, that has been really helpful. And we saw it happening with New York and I've participated in events in Boston and Silicon Valley chapters in Houston.

And just being able to do that here now feels like it, it really, helps us move the dial forward.

Andrew Kazlow: So, one of the things that has been really interesting to me recently is trying to understand the motivations for someone to join an angel network as opposed to deploying their capital with a, a fund or, you know, not participating in this class at all. Right. 'cause like you said, many people don't realize that this is available to them, that they can go direct into these kinds of opportunities.

I wonder if you could unpack a layer deeper. What are the primary motivations that you see for women who are joining your chapters and then maybe specifically, you know, they're in, in Chicago.

Angela Allen: Yeah, [00:19:00] I can start with that one and I'll just tell my own story a little bit. You know, I, um, spent a career in operating in, in a variety of different organizations, usually early staged and, and smaller midsize companies. And often, uh, was the only woman in the room in sales and marketing roles and operations roles and things like that. And my last full-time gig, I had the opportunity to join an early stage company as the, um, on, on the founding team of an all female exec team, which was super cool. I believed in what we were doing, but I also had never seen that, so I'm like, I gotta be part of that. And in the eight years that I was there, we did have a 10x exit.

We went from early stage to VC, and on the second private equity round, I exited in 2018. And after taking a break and thinking about, well, where do I wanna have impact in the next chapter in my life? Um, being able to, uh, be part of this movement that, that Loretta described, really felt right to me. And when I found Golden Seeds and realized there was a group already doing it, it was a no brainer for me to [00:20:00] join. what I find is that the way we do and why I joined Golden Seeds is that, that our members, um, are involved in the due diligence process. We work together on that and by being able to tap the expertise and the knowledge that a, a wide range of people that come to the table with different expertise, um, can bring in due diligence. I feel like it's a higher quality of research that we do. I feel like it gives me more confidence that when I'm investing in something, I'm not relying only on my own eyes, ears, and knowledge, but I'm really able to, um, to validate the thinking that I have with others around the table. And it's more fun.

I mean, we actually, I feel like I'm learning constantly and we're able to do this together. So, I looked at funds, I decided that wasn't the right move for me because I wanted to be more actively involved in the actual investing side of things and supportive of it. And with a fund, you're putting your money there, uh, you're [00:21:00] putting your brain and your, your learning and your thoughts less into it.

And, and that's part of what I was looking for.

Loretta Mccarthy: It is all so true. And I, I think a, reminds me of a phrase that I hear often at Golden Seeds from new members, or prospective members, and they often will say, you know, this just allows me to stay relevant. You know, because you cannot go to a Golden Seeds meeting without learning something about some field you may have known nothing about before. And, and it's, it's not just sitting there learning about these industries. You quickly learn how your own skills and credentials and your background, it can be very relevant even if it's in a field that was not your field. Something about your experience, professionally, or even personally can be immensely useful in the process of evaluating these companies. So, I honestly feel that some people say this is endlessly entertaining. We don't intend to be an entertainment company. But we do know that it is completely [00:22:00] fascinating and people will often say that, this work just keeps them, up to date on this incredible, fast paced world we live in.

Andrew Kazlow: So, clearly the women-led investment entrepreneurial space has matured. I mean just in incredibly over the last 20 years, 3% to, to 30%. That's in insane. But as you said, we're not there yet. I'd love to hear maybe thematically where do you still see gaps or what are the areas of the ecosystem that really frustrate you and that are, you know, you're disappointed by the lack of progress and would like to see kind of continued growth.

I'm really interested. What stands out to you as like opportunities for the next few years in particular, despite the growth we've seen?

Loretta Mccarthy: Um, I think anyone who follows this space would say that one of the challenges for women, and has been for a while even if they are raising [00:23:00] early stage capital from angels, they are still raising capital from venture capital firms. The later stage capital that they ultimately, generally will need, that's a much tougher slog for women. You know, there is data about that that makes it really clear that the progress that has been made in angel investing has not been matched by venture, although there has been progress. And I really wanna recognize that there, that venture capital firms are coming around on this, including the fact that there now are venture capital funds run by women in venture capital funds run by women and men that invest only in women.

So, there isn't a world out there that is paying more attention to this. One of the reasons for that is that historically, there have not been large numbers of women in decision making roles in venture capital firms. And the higher those numbers are, the higher the likelihood that women-led companies will be funded. There's actually research [00:24:00] on that that says that in a venture capital firm. If there is even one person sitting around the table making a decision, who is a woman, the likelihood that a woman-led company will be funded is either two times higher or three times higher. between those range, just by virtue of the fact that a woman is at the table and probably helps guide the conversation about what the woman-led company is doing, which sometimes is particularly understood by a woman. Not always. But whatever the reasons are, the presence of women in venture capital firms definitely increases the likelihood that women will be funded. So, that's a bit of a campaign that we've been on. Although we're not a venture, we have had venture funds at Golden Seeds, but we do actively introduce our companies to venture firms as much as we can. And we've learned that our reputation is helpful there because people who follow us know that our due diligence is [00:25:00] really excellent. And if we have, if a company has made it through the process with us, there's probably something really interesting there. It is a critical thing. You know, very often the ability of these companies to succeed in the end will rely on their ability to raise this later stage capital.

So it's a really serious issue.

Angela Allen: I think it's true, like when I think back to my being on the other side of that table looking for funding and VC and private equity, the number of times there was a woman in the room at all was, you know, limited and oftentimes not in a decision making role when they were. So, I think there's still so much space to go there, and even in the angel level, I know we've had folks reach out to us and apply for funding that specifically want

female representation on their cap table and know that we can provide that, and that, that we will provide the financial side, but also the, the support and involvement where they need it.

Andrew Kazlow: So you, you've talked about the diligence process that you all run a couple of times, and one [00:26:00] of the things that we discussed before the show that I, I would love to come back to is, some of the lessons that you all have learned around market assessment in particular, um, you talked about how, or you mentioned to me how many investors or many newer angels often get excited about the product or the, you know, the story and fail to think as much about the demand side of that equation.

I'd love to hear a little bit more about how you all at Golden Seeds think about market assessment. Why is that so important? And how do you do that? Maybe one layer deeper than you typically go tactically, just to help me understand what that looks like.

Angela Allen: I think it's really important to think about and, and part of it for us is also just recognizing that no matter how great an idea sounds, and even if the product or services better than other things that are out there, really understanding buyer behavior and what it takes to motivate [00:27:00] a change in behavior to moving toward a new solution is absolutely critical. There are so many barriers to making, um, a product or service actually grow at scale that, uh, it's easy to get emotionally connected to the idea of something without recognizing and really looking at whether or not, it will viably grow at the pace that, that, that, um, you know, that, uh, entrepreneurs are expecting. So. 

Andrew Kazlow: Up into the right doesn't always happen. What do you, what do you mean? 

Angela Allen: Shockingly the hockey stick is not an automatic, right? But, um, but yeah, no, I mean it's, it takes a lot to do that. And I've been amazed, even just in my few years doing this in angel investing is, you know, sometimes something that just seems like, of course that's going to work.

You realize like, oh, all sorts of things can get in the way. Um, whether, um, that's just, you know, other external competitors that enter or we look at what's going on with tariffs and the challenges of sourcing [00:28:00] materials. You know, like things that, that you don't even predict happening can, can come into play.

And, uh, of course everyone probably talks about how important it is that a leadership team is excellent and that they're nimble and can adapt and adjust. Um, but recognizing, uh, as well what they need to be able to do to, to truly, um, create something that will cause their marketplace and their buyers to adapt, I think is often overlooked.

Andrew Kazlow: What's your, what's your favorite market diligence question to ask? You've got a founder on, on the call, what do you, what's your favorite kind of go-to question to better understand that? 

Loretta Mccarthy: I personally love asking the question of, if, if you have a team in front of you, and very often you do, it's two or three people. I love asking the question about how do they resolve differences among themselves? Um, you know, if you have a dispute or else just a decision to make. How do you do that? How, how, what is your [00:29:00] process to get to a decision among the three of you who are more or less equal owners of this company? You learn so much when you see a team operating, and Angela has touched on that earlier. It is at the end of the day, every company is gonna change its business model. Its even products.

You know, a lot changes, but it is the, what you're really investing in is the judgment of those people to make the decisions about when to swivel, when to swerve, when to pivot, when to change, when to not change. And what you're investing in. And I love it when you kind of see, they often are rather surprised when you ask the question and they have to think about how do we get, make decisions.

But it is useful and because that's what you see the team dynamics on full display in a question like that in my mind.

Angela Allen: You know, when you asked that question, the, the first thing that came to mind for me was actually, a little bit of what not [00:30:00] to do, and you've probably heard, you know, similar stories, but there's a lot of bias built into the whole investing process and research that's indicated that oftentimes a, a female, uh, entrepreneur may be more likely to be asked questions about the downside

to their possible success, whereas, uh, male entrepreneurs are often asked about the upside to it. And I think we've seen that play out. So, the first thing that came to mind when you asked that is like, ah, like, make sure that we're not going too far into that bias, and that is a fine line to do thorough due diligence without, um, undermining the process in that way. Uh, I love asking for scenarios, right? It's just what hap what would you do? And it kind of builds on what Loretta was saying around seeing how the team interacts, but like, what would you do if a new competitor came in and had exactly what you have, uh, and they offered it?

What would you do if this changed? And while we won't know what the challenges are, understanding how quickly they can adapt and think on their feet, but also understanding where they've done the research and thought about it is [00:31:00] really important as well. Uh, I also have seen us do a pretty good job in due diligence of just asking it directly, right?

Right. Of like, this is, you know, a change that you're asking. Tell me why you think the, the, you know, customers would make this move. And you can get a lot, um, from just being direct and honest about the conversation as well.

Loretta Mccarthy: And that reminds me to say that one of the most, um, enlightening questions sometimes is say, tell us about your competition because it, it, It can be true that they, that an entrepreneur is less aware of competitors than you might think. I think they're just often so convinced they've done something so great that they're gonna outperform the competitors who do often have a hold in the market. And sometimes the biggest competitor here is inertia. And that, you know, it's good to recognize that and you don't get that. It was part of the answer very often. But, um, being and listening, being aware of competitors is part of a listening [00:32:00] skill. I mean, all entrepreneurs need to be such great listeners. Listening to their team, listening to their customer, listening to the marketplace, listening to their investors.

I mean, a lot of these conversations, at least, I often find, I myself assessing how good are they listening, because it's not just that I want them to listen to me, it's just that they're that kind of keen awareness of the world around them and the input that they may be getting, is, you know, not that it's all right, but being really prepared to listen and know that there are informed people out there who are gonna give me some feedback is really important.

Andrew Kazlow: So, when someone says, we have no competition, uh, you're, you're not particularly excited about that answer.

Angela Allen: Yeah.

Or the, or the, the slide that everyone has that has all the check boxes in their category and zero check boxes in some

for each and every other competitor. And it's great that, that we have that. But you know, we [00:33:00] also, in our due diligence will look and go out and see if we can find our own competition even, uh, you know, with, which I'm sure most would recommend.

But, um, it is amazing, um, what you can learn when you just get out there and, and, and, and dig in.

Andrew Kazlow: So, Angela, you mentioned something that I thought was really interesting and I want to understand better. You mentioned the bias that often exists when investing in assessing investment in women-led businesses. I got, I got a bit of a primer on that thanks to Kate Brodock with Switch, uh, and the W Fund a few months ago.

Does that bias exist in female investors as well? Do you all have to deal with that as well within your community, or is that naturally changed given that you know your community is, like you said, 80% are composed of female investors, of women investors. Is that bias there as well, or what, what, how do you deal with that in your community?

Angela Allen: I think it is a really great question and for us, because we're only looking [00:34:00] at, you know, highly, you know, exciting and interesting companies, but also that have to have a woman in the C-suite for us to consider investment. You know, every deal that were evaluating has women involved in it. Um, I think that, you know, it's hard to say like if we are acting any differently with one to the other, but I, I find that once I read and learned about that kind of bias, so many things clicked for me. Having been on both sides of the table. And I think just being aware, like many other things, allows you to just operate differently.

So, I just check myself and I think about how I'm asking the questions that I'm asking. And I think that, uh, within our community we are intentional about supporting women and, uh, entrepreneurs at all levels, even those that we're not going to invest in. Uh, and I think that starts shifting the dial for sure.

But I dunno. Loretta, what else would you add?

Loretta Mccarthy: You know, I, I think, I don't think that [00:35:00] there is that natural bias with women investors, but I, think women investors are naturally thorough and careful about how they go about making these investments. So I think they are looking for kind of what could be the concerns here. But I think that one of the things that happens in a group setting is that we are, we learn from each other. So, we really learn how to ask the questions that get to what the risk of this business might be without asking the question in a negative way. I also find that sometimes I have the opportunity to advise entrepreneurs on this, and that is that if they're asked a question that is negative or let's say kind of looking for the downside, like, what could go wrong here or why are you so sure about? I often say, pretend that it was a promotional question and just answer that question. You know, so that you, if they are asking a question of what could go wrong here, which is kind of the little bit of the tone of that research [00:36:00] that was done. I often will say, well, just tell them what could go right here, you know, just turn it around because it's so instinctive for people.

They don't even know that they've fallen into that trap, but the entrepreneur can turn it around. Anybody who's been trained on PR ever, knows that sometimes you just answer a question they didn't as ask, because that you wanna get your point of view out there. So, we sometimes advise our entrepreneurs to don't let that get to you.

Just make sure you know, what are the points you wanna get across and figure out how to do it.

Andrew Kazlow: It's such a tricky topic. You know, we've talked about it enough on this show that, you know, I'm to the point where, okay, everyone keeps telling me about this bias that exists. Obviously this is a good thing we're talking about it because the awareness, like you said, shapes, behavior, right? Becoming aware of the thing allows someone to adjust their behavior.

But man, it makes me super glad and excited to hear that you all are doing this naturally and creating this systemic change. Loretta, you also mentioned [00:37:00] some of the advising work that you get to do, and I assume that many others across the Golden Seeds ecosystem get to do as part of your work here.

Talk a little bit more about the role of advisory support from members of Golden Seeds and beyond. If you have any structures in place to help entrepreneurs think through. All of that because to your point, good advisors, can help turn around a negative question, just having had that coaching, so, so tell me a little bit more about how Golden Seeds thinks about advisory work and relationship.

Loretta Mccarthy: Um, it's somewhat informal. In some cases though, it does take on more formality. But, once an entrepreneur has gone through our due diligence process, very likely she has formed bonds with people here that will persist far beyond the first closing and which is great. And there, and, and investors here are likely, in many cases to take it upon themselves to help out wherever they can with these companies. It's not [00:38:00] just the investors in that company. We actually often reach out to our other investors all over the country to say, here's a company that needs an introduction over here. You used to work at that company.

Can you make an introduction? So we do a lot of that through because we keep detailed records of our own members and we know who might be able to help out where. Sometimes they take on more formal advisory roles with these companies. Sometimes they will step in to be a fractional this or that for these companies if they really need it. You know, that's a very specific kind of ask, but we, we can see if we can support that. And very often we join the boards of these companies. Over all of our years we've had, I think it's now 115 board seats or board observer seats in these companies. So it is, um, very, it's common for us to serve on the board and I will say that these companies are generally forming their [00:39:00] first ever boards when they come to us. If it's seed round, they're first time, they're raising outside capital. And that means they need to form a board. And if we do, are selected for a board seat, which often relates to how much are we investing and does that more board seat. It is possibly the single best point of leverage for us because then you have someone sitting at the table helping shape that company's strategy and really playing an invaluable role. And that's when you know, they often, as they go through later rounds of funding, that kind of advice becomes really invaluable to them.

And those same people can come back to Golden Seeds with some of our really sophisticated financial people and get some guidance about the instruments that under which they're raising capital later. So, because not everybody has all of that experience, but usually somewhere at Golden Seeds we can help out.

Andrew Kazlow: I love that you mentioned this point. The, I believe the Angel Capital Association and their [00:40:00] most recent Angel Funders Report did a specific analysis of performance over time when a Angel Group member was on the board and when they were not, and saw, I, I forget the exact stats, but material difference in terms of overall performance when a board seat is present.

And so I, I love that you mentioned that point.

Loretta Mccarthy: Yeah. Thank you. They do some great research at the ACA.

Angela Allen: They do.

Andrew Kazlow: Okay. Well, we've only got a few minutes left. Uh, I'd love to just hear more statistics and like give me the data on Golden Seeds. You guys, I mean, you mentioned a hundred and, what was it, 115, 114 board seats over time. Tell me some more of the statistics just to understand the scope of what Golden Seeds has done as an ecosystem.

Nine chapters. You know, I, I saw somewhere like 1,100 plus members, you know, through the course of the organization's journey. Like, my goodness, tell, gimme some more of the, the statistics.

Loretta Mccarthy: We see about a thousand companies a year. That's a good place to start. [00:41:00] And about 500 this year, I think it will be 475 companies actually go through the process of applying for funding. And then there's another 500 or so that go through office hours all over the country where we conduct events where entrepreneurs can come in, which is one of the other great things about Chicago.

We'll be having office hours there. And that's a great way to meet entrepreneurs often before they're really ready to apply for funding. Of the 5,475 companies that, uh, apply this year, um, they will all go through some process. Some of them will get meetings, some of them will get several meetings. Some of them will get an entire due diligence process, and we will invest in about 15 or 16 new companies this year. We will also invest an equal amount of money and maybe more in follow on rounds of our 90 operating companies. So the follow on rounds are always a big part of our investing, and we don't automatically write checks. We do some level [00:42:00] of due diligence on those as well. Um, so that's kind, kind of the process.

A lot of this activity is going on, uh, all over the country in these nine chapters. We have organized our work in recent years by sector, because women are doing so many interesting things in every sector. So there are three principle sectors, consumer businesses, B2B technology, and healthcare. Women are strong in all of those things.

So the first pass at any application that comes in is done by the people who run the sector group for that company, that the industry of that company. Um, because they are really the experts, they can say, this is a good enough idea to have a meeting and put them through a screening meeting and then subsequent meetings after that. Almost all of our events are held on Zoom. In fact, everything's held by Zoom. Some things are hybrid, but we urge all of our members all over the country to [00:43:00] participate. Currently, we have indeed had over 1,150 investors over all of this time. People renew every year, or they don't. So currently we are getting close to 300 members right now that that's kind of the process here. Um, we have a very high renewal rate. We have an 84% renewal rate, so people get an invoice every year and they decide if they wanna stay and sign on for another year. A lot of our members have been here for a really long time. I think the last time I looked, 10, 20% of our members have been here for 10 years or more. 

So it's, you know, it's with, people are really loyal. You know, it doesn't work for absolutely everybody, but it does work for a lot and part of it is people really, really enjoy working the other people who are engaged here. It's a fascinating group of incredibly accomplished women and many devoted men to do this work with us. And they love working all over the country and meeting [00:44:00] people that are very like-minded on a lot of this that they would not have otherwise met. Um, and as I said earlier, people are, get better and better at doing this work. One of the things I don't think we mentioned earlier is that we have a training program that we, uh, offer to all of our investors.

We offer it to anyone. It's just that it, if you're not a member of Golden Seeds, you pay a small fee. But there's a nine part training curriculum here that is considered as one of the best in the industry and it, it covers the basics of angel investing and how to serve on a board and how to anticipate the changes in cap tables over time.

I mean, it gets quite technical, but we also have courses on each of the three industries, which is unique. Most training programs for angel investing don't have a course on medical devices. And what do you really need to know about that compared to kind of SaaS businesses and why are they different than medical devices are better [00:45:00] than food and fashion are different than food and fashion.

So if you're a member of Golden Seeds and you go to a meeting where you see some of all of that, it's really important to have some clarity about what is the process for deciding to invest in a particular industry. And they all have their characteristics and they may be regulatory or FDA or inventory or stocking fees.

I mean, there's so many characteristics for all these industries. So we decided a few years ago we really needed to do sector training. So it it in our members that like anything in life, the more knowledgeable you feel or the more confident you feel about doing the work, whatever it is, the more enthus, the more you commit to it in a lot of ways atleast.

I don't know about you, Angela. I think that's what I've observed. People love the training because they, no one wants to look ignorant about this, so why not train?

Angela Allen: Yeah, I, I would, [00:46:00] I couldn't agree more. The training's been fantastic, and I know a lot of our new members in Chicago have just, you know, found that to be a huge, uh, value add and reason why they wanna, you know, get started with angel investing with us. So, yeah, it's, it's good stuff.

Andrew Kazlow: Okay. So final question for both of you. Somebody's listening to this, they maybe made one or two small crowdfunding investments. They're just getting into the space. They're considering their first, you know, substantive angel investment. Uh, what's one piece of advice or one encouragement you would offer to them?

Angela Allen: I'll start and then let you go with the final comments, Loretta, but I would just say you go for it. One, if you are interested, there's so much out there, there's so much need and there's so much opportunity, um, join us. And I would say literally if you are looking to do it with a group, if you are new at it and you want to accelerate your learning, have fun doing it. Find a group, whether it's us or someone else that fits your kind of investment [00:47:00] strategy and mission. Um, this is the kind of thing that it's so much more valuable. It's definitely, um, multiplicative to be able to, uh, do angel investing with other like-minded people around the table with you.

So join a group, learn that way, um, and, and dive in. Have fun. 

Loretta Mccarthy: And I would only add to that, that you can definitely join a group, but before you join a group, you can go sit in on some meetings because it at least, it's very clear to me when people come to Golden Seeds, and I imagine this happens elsewhere, if you're a guest observing the action, it, it becomes very clear and not too much time whether this would be something that would work for me, whether I would like to do that activity, do I think I'd like to work with those people?

Did I like the way they run that meeting? Whatever it was. But I think most groups. I imagine, all groups in fact will invite people to come and observe, and by all means, this is a, a big commitment to [00:48:00] join a group, spend the time, and do this level of investing. So people should feel free to look around and decide what kind of environment is going to make them most satisfied with this.

Andrew Kazlow: Well, Loretta, Angela, it's been wonderful to get to know both of you. Thank you for taking the time to join us today, and thank you for the work that you're doing to just serve the women business community around the world. Uh, very excited about the new chapter launching. I wish you all the best of success.

Anybody listening to this, uh, in the Chicago area, give uh, Angela a call. And, uh, we look forward very much to our next conversation.

Loretta Mccarthy: Thank you for having us, Andrew.

Andrew Kazlow: Thanks for listening to this episode of The Diligent Observer. I'm your host, Andrew, and if you're an angel investor looking for essential angel intel in five minutes every week, I think you'd enjoy my newsletter. I send my best stuff, interesting deals, and more straight to your inbox so you never miss a thing.

Subscribe today@thediligentobserver.com.