How Women Can Make Their Companies Highly Attractive to Investors with Power Venture Capitalist & Women Entrepreneur Advocate, Jeanne Sullivan.
As women are the majority owners of more than 10 million small businesses,only 3% of the total venture dollars invested from 2011 – 2013 had a woman asCEO. Venture firms with women partners are more likely to invest in women-run companies. That is the good news however; the tough news is that there arevery few women partners in venture firms – only about 6% of firms havewomen partners.
A new study from the Center for Venture Research reports that women as angelinvestors are increasing by an impressive amount over last year…26% of allangels are women in the U.S. Furthermore, 36% of companies seeking angelfunding were women, an increase of 83% from the previous year. Thesestatistics demonstrate that the plan to provide access to capital and education isworking.
We had the wonderful opportunity to speak with Jeanne Sullivan co-founder of Starvest Partners a venture capital firm that has a strong expertise in investmentbanking and financial structuring, operations, marketing, technology development and corporate governance. As a Ted-X speaker and advocate forwomen entrepreneurs (and a few good men), Jeanne is able to sit at the table as an active board member and invest with some of the most successful investorsand companies of our time. In this informative interview, Jeanne breaks down how to approach investors, how to be prepared and how to elevate your chancesof securing an investor for your company.
On the biggest barriers against women locating a suitable investor:
The entrepreneurs who “get the wallet out of the investor’s pocket” know whatto do and how to do it. First time CEOs raising capital need to learn the ropeson how to effectively raise capital. There are some important lessons to belearned and there is much information on the web and from entrepreneurs whohave succeeded. The most important thing to note is that you must have theability to paint a big vision and back it up with the right financial acumen.
Another barrier is access to capital. It is hard to get to the right angel orinstitutional investor. Women have to learn to build, and then use their businessnetwork. To get the job done, seek the investor who has your stage, geographyand subject matter focus. The best angels who know you in the early stages –already know you as a trusted entrepreneur who can get the job done. Seektheir guidance because when you seek money you get advice and when youseek advice, you get money.
On key factors that determine when an entrepreneur needsan investor:
I believe it is important to build the “MVP” – the minimum viable product.Otherwise, you are merely a team, a dream, a PowerPoint and a dog. If you canshow the product, test with customers and give feedback and references – thatenhances the opportunity. Now, if you are ready to scale, you must understandthe amount of financing that will take you to different milestone and be readyto articulate those steps.
On how to be prepared before approaching an investor:
One of the biggest areas of need for women CEOs is to learn the financialaspects of the business. I recommend getting a strong finance professional at your side to “teach you the ropes” and to learn the following aspects: How tonegotiate a term sheet with an investor, what does valuation of a companymean and how much equity should I sell? How much capital will be requiredover time to fund this business? How will my business scale and how profitablecould this be in time? These are just some of the areas of financial acumen thatare needed.
On best funding options for women entrepreneurs and howwoman can approach these avenues:
I always advise the following, “Who are your Angels”? Look around – arethere people who you have worked with that trust your instincts andcapabilities? Is there a neighbor or friend that has the domain experience youseek? Look at those people first. Only seek institutional financing once youhave a real product or service – ready for revenue. Then, ensure that you areasking the right fund for a meeting – based on your stage and subject matter.All this information is available through your research and networking. Build apersonal board of advisors – then meet periodically to discuss various aspectsof building the business and getting the financing. This team can help guideyou and the investor will call them for a reference on you – which wouldenhance your chances for success.
On imperative interests that investors look for in companiesto invest in:
There are 6 key questions we ask for the due diligence process: How large isthe market and what is your total addressable market? Who is on the team andwhat are the capabilities of the CEO? What is the product or service and whatis the high vision and product roadmap?Can this team execute on this vision?What are the financing metrics? And lastly, can this business scale and howmuch capital will be required?
On effective ways to prepare your company for an investor:
You need 3 important “tools”. To start, you need a succinct email that tells yourstory about the product or service – What you are building? Be able to specify,what you are seeking from this investor? Make sure to ask for the meeting. Youshould also construct an executive summary with a solid overview with keyinformation. A one-page overview is ideal. Lastly, a well written PowerPoint –there is much help for this on the Web and some best practices.
On how women entrepreneurs should take authority inasking for what is needed from an investor:
One important and valuable “trick” – learn from other role models, especiallysuccessful men and women who have raised capital. Ask a friend or advisor tocoach you. That can make a powerful difference. Also, watch some of thegreat shows that illustrate these successful entrepreneurs including Shark Tank.
On advantages women entrepreneurs have that they maynot be aware of when dealing with investors:
Due to the blending of technology with other areas where women have deepdomain knowledge, women have an advantage. A few examples includefashion and fashion tech, e-commerce opportunities related to many differentsectors and subject matters, health related companies – because we care aboutour families and are seeking products and platforms that improve the health andwelfare of others. Plus – we, as women, have a different “lens” through whichwe view every aspect of building a business: the team culture, the productfeatures, acceleration of our companies, customer services, and targetingmarketing customers and more.
On insights about investing and the luxury industry:
You have to show that you “know what to do and how to do it” that means –articulate a clear and “unique, unfair advantage” but also show how you will execute. It is also important to find the investor who is focused on your type ofluxury good or service. Do they want early stage? Could there be a strategicinvestor who would distribute your goods or services? Understand the capitalneeds of the business, the margins over time and how you will scale. Putresources at your side that can help you package these issues and learn fromthem. Opportunity abounds – you just have to learn how to seize it. Also, donot be afraid of technology in this space. Is there really no technology for aluxury brand? I don’t think so…because social media, e-commerce and mobileare all mission-critical for success. These elements play an important part inscaling and success of any business today from the smallest boutique to thelargest platform for a luxury brand.