Tuesday, December 23, 2014

The Pitchdeck Interview #39

The Pitchdeck Interview #39

Really enjoyed my interview for The Pitch Deck podcast with Gavin McCulley - now out on iTunes. Makes me Episode 39 of a series Gavin is doing for entrepreneurs where he talks with angel and VC investors as well as entrepreneurs themselves. 

You can listen to the interview HERE.

Gavin talks about The Pitchdeck in the video below. Subscribe on iTunes!

Happy Holidays and all he best for 2015!



Sunday, December 7, 2014

JFDI - Julia Shapiro and Jules Miller of Hire an Esquire

Six Habits of Highly Successful Founders


#6. JFDI - Julia Shapiro and Jules Miller of Hire an Esquire


One of the core values that the Hire and Esquire (HaE) co-founders Julia Shapiro (CEO) and Jules Miller (COO) have instilled at their company Hire and Esquire is proactivity. That is easy to say … but what does it mean in startup practice? 

At HaE it means “JFDI” (Just f-ing do it!”). In daily routine when you or I (definitely I) might say "we should schedule a meeting for x" or "we should email y" Julia and Jules pause and just do it at that very moment. So a procrastination embargo.

A specific example of how this works beyond the day to day of office life came about when they talked "legal tech collaboration" with another legal tech entrepreneur at a happy hour. In that dialog they and came up with the idea of a legal tech demo day to bring customers to HaE. What next? JFDI! So over the next few weeks they planned it and made it happen starting with EvolveLaw Demo Day at WeWork with 25 people. Next iteration working with Stanford CodeX to host an event with 150+ people. 

Julia and Jules believe that they have successfully instilled the JFDI approach in (most - it’s a never ending education process) of their team. And they are delighted to see how much team members get done when the co-founders aren’t bottlenecks! But for JFDI to work a) they have to trust your team and crucially b) they need to make sure that their team members have a clear sense of the company’s priorities to frame their independent decisions.

Lesson: JFDI - it’s as simple as that!

For a full list of the Six Habits - click HERE

Win the game of “whack a mole” - Kelsey Recht of Venuebook

Six Habits of Highly Successful Founders

#5. Win the game of “whack a mole” - Kelsey Recht of Venuebook


A startup up is a highly iterative journey. First working to product market fit then moving forwards to optimize your product/service and delivery to customers - so testing and learning to identify what works and does not work. Then you quickly fix things that are not working. 


As you scale you always encounter new obstacles. Kelsey Recht CEO of Venuebook noted that one of her board members calls it "whack a mole". ie you fix one bottleneck and another one is created someplace else. 

What I know Kelsey does very well is having an open dialogue where team members feel they can bring up growth pain points and then address them very quickly. Kelsey’s motto is “don't tell me who caused the problem, just tell me how to fix it.”  

Besides being a smart way to iterate, embedded in this approach is a strong message about the culture of the firm she is building - problems/issues happen all the time so surface them don’t hide them. The whole team benefits when things are more transparent and the focus is on solutions and ceaselessly improving the product and customer experience.

Lesson: There is always a new mole. Whacking it and moving on is a team sport.

For a full list of the Six Habits - click HERE

Build to scale, before you scale – Lisa Xu of NopSec

Six Habits of Highly Successful Founders


#4. Build to scale, before you scale – Lisa Xu of NopSec

I was fortunate to spend the first half of this year as interim CFO at NopSec working with co-founders Lisa Xu (CEO) and Michelangelo Sidagni (CTO) and saw first hand the value of building “repeatable processes” across a startup BEFORE they are needed … so that scaling the business in response to customer demand is much less painful. 

Lisa is a master at doing that … with huge benefits to the organization. We all know that cloud based services have made it cheaper and easier than ever to build scalable tech platforms – or at least an initial MVP version. Having used that to validate product-market fit doing the actual scaling of the businesses involves so much more than buying more compute or storage however. It involves developing and scaling many interlocking processes from customer acquisition, on-boarding, customer service, finances, HR etc. 

However for many startups the challenges of scaling across these other dimensions often are faced when, to use an old tech analogy, the rivets start popping out. This is because the processes that enable that broader scaling often feel like bureaucracy for a start up and hence are deemed toxic … until things derail. For example a key employee leaves and folks realize exactly what she/he did and how are not documented or processes that worked for single units just don’t work at 100s never mind 1000s. 

As Lisa demonstrates, proactively building processes to scale, before you scale, is a smart move.

Lesson: Don’t just be hands on, be hands ahead

For a full list of the Six Habits - click HERE

Pitch, pitch and pitch again – Erika Trautman of Rapt Media

Six Habits of Highly Successful Founders



#3. Pitch, pitch and pitch again – Erika Trautman of Rapt Media

Like many (most!?) start up CEOs Erika Trautman at Rapt Media has spent considerably more time than she ever thought likely or even possible talking to money. In the last three years, which have seen her go from multiple notes to and A and most recently a B round she estimates that fund raising has taken up 40% of her Rapt Media life. 

The statistics about the imbalance in funding of women led companies by angels and even more so VCs are well known and the issues of unconscious (mostly) bias that lie behind this are complex and subtle. However as Erika wrote in an article for Entrepreneur Magazine, after talking with 200 investors she learnt a lot. 

Obviously appreciating quickly, if not from the get go, that fundraising is a key part of the CEOs job description is one. But more so developing you story told by an authentic you and seeking the investors with whom that story will resonate. As she put it: “ultimately, shrewd tenacity may be even more important than selling the dream.”

Lesson: Pitching is a core function of the CEO - but only pitch as the real you

For a full list of the Six Habits - click HERE

Never, never, never give in – Allison Dorst of Pinks and Greens

Six Habits of Highly Successful Founders



#2. Never, never, never give in – Allison Dorst of Pinks and Greens

It is hard to single out any single entrepreneur for their grit and determination. Because, of course, it goes with the territory. However as an investor it is nonetheless impressive to see a founder who has bootstrapped themselves to $1mn/year+ in revenues learning the ins and outs of an entirely new business to along the way. This is especially so for Allison Dorst, a founder who was a banker for nine years and decided to learn ecommerce business from the bottom up ... and built Pinks and Greens in the process.

Needless to say I have a bias when it comes to the much maligned investment banker class having been one myself. Although, as I wrote last year, I genuinely believe that ibankers have an intensity of customer focus and timeliness that fits well in startup land. Quite rightly investors put a high premium on domain expertise and market knowledge. 

But in my view that expertise can be learnt and learn quickly especially by someone working it 24/7 who is in continuous learning mode and never gives up. A couple of years of that sort of domain expertise acquisition is a very powerful way to acquire the proverbial “unfair advantage”.

Lesson: Be super persistent and always be learning

For a full list of the Six Habits - click HERE

Be the Wizardess of Oz – Kathryn Minshew of The Muse

Six Habits of Highly Successful Founders

#1. Be the Wizardess of Oz – Kathryn Minshew of The Muse

As I explained to Ben Fischer as The New York Business Journal back in April, "As you're trying to start a company, in the normal course of events, a lot of very reasonable people wouldn't give you the time of day, so you have to find a way to make yourself the Wizard of Oz, in that you command more attention that is really justified by the substance." Or, as I put it in the context of Kathryn Minshew CEO of The Muse, The Wizardess of Oz. 

Hopefully Kathryn took that comment as a complement although frankly now it is looking dated. From the team of three co-founders hitting Y Combinator back in 2011 The Muse is now a team of over 20 and The Muse web site is approaching 2mn unique visitors/month. 

But I think the observation holds true … that in that early phase of a startup, especially when you are selling to skeptical enterprise customers, getting your own and the companies profile and credibility as high a possible is vital. Getting ahead of you startup skis so to speak. Then over time you can earn your way into that stature … and more.

Lesson: Smart startup promotion is a core skill, use it or lose it


For a full list of the Six Habits - click HERE

Six Habits of Highly Successful Founders


Six Habits of Highly Successful Founders


So what did I learn in 2014 from some on my start up investees? In this post I share are some of the things I have seen six companies I have invested in do especially well. 

Typically posts on what makes a great founder/entrepreneur expand on lists of keywords, most pretty self evident and also often contradictory when you compare different versions! 



Rather than repeat that exercise I tried to identify more concrete and actionable “habits” These are nitty gritty execution tactics and strategies that have taught me, as an investor and advisor, a lot of practical startup wisdom.

In no particular order here are my Six Habits of Highly Successful Founders:

1. Be the Wizardess of Oz – Kathryn Minshew of The Muse
Lesson: Smart startup promotion is a core skill, use it or lose it

2. Never, never, never give in – Allison Dorst of Pinks and Greens
Lesson: Be super persistent and always be learning

3. Pitch, pitch and pitch again – Erika Trautman of Rapt Media
Lesson: Pitching is a core function of the CEO - but only pitch as the real you

4. Build to scale, before you scale – Lisa Xu of NopSec
Lesson: Don’t just be hands on, be hands ahead

5. Win the game of “whack a mole” - Kelsey Recht of Venuebook
Lesson: There is always a new mole. Whacking it and moving on is a team sport.

6. JFDI - Julia Shapiro and Jules Miller of Hire an Esquire 
Lesson: JFDI - it’s as simple as that!


Sunday, November 23, 2014

Keynote at The Refinery: Investing in Women Led Companies - Two Nos and a Yes

Keynote at The Refinery: Investing in Women Led Companies - Two Nos and a Yes

I was honored to be invited to give the keynote at the first Demo Day (well Night actually) for The Refinery. This is a Westport, CT based accelerator focused on women led companies. Kudos to founders Janis Collins and Jennifer Gabler for all that they have achieved with this program.

I wrapped up my talk on "Why Invest In Women" (the main thrust of my talk was actually "Why on Earth Not?") by explaining why I personally favored diverse founding teams crucially with one or more women. I think I surprised some in the audience by posing three possible justifications - of which two were nos and one was a yes.

This is (roughly) what I said:

"You may think I am investing in women led companies because the funding environment for them is inherently unfair. Yes I do think it is inherently biased and I do want that unfairness to be remedied. Indeed I hope what I am doing can contribute to that. But it is not why I am investing in women led companies."

"You may think that I am investing in women led companies because I have three daughters and I want the future environment for them to be a better one should they chose to be entrepreneurs. Well I do most certainly want a more equitable environment for them. Indeed I hope what I doing am can contribute to that. But it is not why I am investing in women led companies."

"I am investing in women led companies because, first and foremost, I am an investor. Not an impact investor. Just an investor. I am not investing in social enterprises. Just scalable no nonsense for profit businesses. My objective is to achieve an above average return on my money invested. By investing in companies with diverse founding teams including women the facts and investing experience suggest that I am more likely to achieve that objective. So yes, that is why I am investing in women led companies."


Monday, November 17, 2014

Women's Startup Lab: Japan comes to Menlo Park

Women's Startup Lab: Japan Comes to Menlo Park

Having lived in Asia for seven years and traveled extensively in the region I was lucky to experience first hand the different cultural and business perspectives that have helped power so many successful economies in the region. So it was inspiring for me to speak to someone bringing their insights and energy from Asia to the startup scene here in the US.

I had the pleasure of meeting Ari Horie, Founder and CEO of Women's Startup Lab (WSLab) on her most recent visit to New York. In Ari's case her refreshing take on the operations and objectives of the startup accelerator she founded and runs is born of her upbringing in Japan generally and succeeding as a woman there specifically. (Ari fist came to the US as an exchange student at age 18 - speaking no English.)


WSLab is a conventional accelerator in the sense that it is a three month long on site program in Menlo Park taking cohorts of about 12 startup teams per class through a program designed to increase their odds of success as businesses - so putting them together with technical, marketing and other experiences coaches and mentors, developing pitch skills and making introductions to investors etc.

Needless to say per it's name this accelerator prizes diversity and supports women entrepreneurs specifically - each team must have at least one female founder. But more than that Ari brings her own passion to bear when it comes to the power of teamwork and specifically group learning. She calls this her: Magic Happens “Hito” rule. In addition Ari wants WSLab to send graduates on their way who are better entrepreneurs, yes, but also better leaders. So leadership development training is a an important of the accelerator's activities.

You can learn more about WSLab HERENote that applications for the Winter 2015 Class (starting in early 2015) are now open.

Also Ari was named one of the "CNN 10" Visionary Women earlier this year - you can reach more about that (and hito) HERE

And you can follow WSLab at: @wslab and Ari at: @arihorie

Finally ... nothing to do with WSLab but I love this picture of traditional Japanese cherry tree blossom ... with a big city twist!


Saturday, November 15, 2014

My latest investment: Validately - a really neat tool to assist in UX design

Validately: Validate demand or usability on a clickable prototype or live feature




I recently invested in Validately. thought I would share some of the details because in todays fast iteration/lean development world it is a really neat tool for most anyone to use - early stage startup or more established business - to quickly test out UX features ... before spending the time and money to put them into production. Emphasizing Validately's appeal as lean development tool Steve Blank, whose book: "Fours Steps to an Epiphany" arguably launched the whole lean startup movement, is also an investor.

CEO and co-founder Steven Cohn is happy to do a quick demo so ping him at steven@validately.com if you or someone on your engineering team wants to learn more directly.

Here is the a more detailed take from Steven on what Validately is all about:

Product value statement: Only build what customers will use!

How: Validately is a rapid user feedback platform to test demand or usability on a clickable prototype or live feature! We also offer free education and consulting on Lean User Testing best practices.

Process Education: 
  • Our blog (Lean User Testing Tactics) has some great lessons.
  • We also offer Free consulting to select customers. We can review existing tests, plan a new test or discuss organizational testing process.
Product Features:
  • Recruit. Test on our targeted panel (including Consumer & B2B targeting options) or on your customers (using our free recruit widget).
  • Record. We record every mouse click, page scroll, text input box that your testers do and playback the recording at your convenience. We support our own prototyping tool, as well as InVision, Axure and HTML prototypes. It even works with live HTML sites (no messy browser plugin required).
  • Analyze. Filter results using our funnel & exit reports or graphs of qualitative responses.
  • Affordable. Priced to let your team test and learn without thinking about cost.

Wednesday, October 22, 2014

MERGELANE - a new accelerator focused on female founders

MERGELANE - a new accelerator focused on female founders




MERGELANE, is a new Boulder based accelerator program focused on women led companies. 
You can see their launch press release announcing the launch HERE.

The founders Sue Heilbronner and Elizabeth Kraus are using a hybrid residential (two weeks at the front end, one at the back end) residential and virtual coaching/mentoring model. More program details and the application form are HERE. Applications for their first cohort of 8 companies closes December 1st.

I am delighted to be one of the mentors and will be in Boulder for a few days in Feb 2015 as part of the kickoff for the first cohort. 

Needless to say I and many others have written in the past about the unconscious biases in the early stage world and their manifestations including:
and yet
So this is definitely a project worth supporting in my view. 

The objective of the founders is to "make MergeLane obsolete". While I suspect they might be in business for a while ... hopefully that objective will indeed be realized!






Friday, October 10, 2014

Microsoft: Why "Just Ask" is still a B-


Microsoft: Why "Just Ask" is Still a B-

In a positive sign that more and more people in the community are paying attention. The volume of "women in tech" (or rather lack of women in tech) debate has been rising. Albeit promoted by some egregious examples of thoughtless and worse behavior that has come into the public domain. (And safe to say this is just the tip of the iceberg.)

But there is a long way to go. Satya Nadella's comments at the recent Grace Hopper Celebration of Women in Computing Conference were summarized in a <re/code> post by Kara Swisher


Much has already been written on this massive women in tech faux pas. Here are my three cents on the topic:

1. The obvious - it's patronizing to talk about karma
No need to go over Mr Nadella's response to a question about women who are uncomfortable asking for a raise. Women earning 78c to the male $ across the US. Multiple studies highlighting the pay gap as not being a function of merit. So asking those being compensated at a discount to trust the system was, to be polite, tactless. However it also displays a touching belief in the meritocracy of tech in particular which is hard to square with observable realities. For example in another context a recent Babson study noted that in a recent three year period just 3% of companies receiving Venture Capital funding had women CEOs. Meritocracy? Really?

2. The less obvious - you need to understand why women don't ask in the first place
In a quick response to the furore these comments created Mr Nardella issued a I am sure heartfelt succinct apology via an email to all staff (and hence the public). Good for him. But I call this a Level 1 response. The "if you think you deserve a raise just ask" message is not enough. Because a more sophisticated Level 2 response would require a recognition that women don't ask (or rather they do but at a rate dramatically less than their male colleagues) and often for good reason ... if they are not careful they fall into the "double bind" trap. One where unconscious bias plays a part. This is a complex issue and one of the many that my colleagues at the Center for Talent Innovation have devoted years of effort into researching. A call to the Center's founder Sylvia Ann Hewlett might be in order! "Just Ask" is just a B- in my book.

3. And an obvious trap (or not) - you now need to be the change (you say) you want to be in the world

In my view Mr Nadella has fallen into a trap he set for himself. Something that Nilofer Merchant points out in an excellent post for Time. In his apology message to staff (and the public) he said:

"I wholeheartedly support programs at Microsoft and in the industry that bring more women into technology and close the pay gap. I believe men and women should get equal pay for equal work."

Which is heartening to hear. But now the challenge to Microsoft is to, if I can mangle a line attributed to Ghandi: "Be the change it (says it) wants to be in the world". 


Nilofer makes this argument powerfully summarizing it as follows:

"Take action. Yourself. Bias is fixable. But (and this is a big but) only with conscious leadership."

Taking Nilofer's advice would move the Microsoft grade to an A.





Monday, September 29, 2014

Reverse Due Diligence - Founders on Investors


Reverse Due Diligence - Founders on Investors

Due diligence ... from the investors view point


This time last year I wrote three posts on due diligence - what early stage investors do when they are working out whether to put money into an early stage company. All good arguments have three points so there were three posts!
I feel more strongly than ever about the opinion I expressed in the "Philosophy" post. Namely that we need to recognize who is taking the real risk when, as early stage investors, we put our money behind an entrepreneur. And hence treat them with commensurate respect.

As a practical matter, RESPECT to me in this context means undertaking your investment due diligence with the following thoughts top of mind:

1. Being super sensitive to the entrepreneur's time and not sucking them into your own time wasting analysis paralysis. This might be an interesting intellectual exercise for YOU but might kill their ability to execute their business. Early stage entrepreneurs have no staff, no admins to hunt stuff down for them; they have incomplete data; heck they probably aren’t drawing a salary.

2. Getting to YES or NO as quickly as you can.

3. Communication directly and honestly why your answer is NO, if that is where you end up.

A key issue we all face as an early stage investors doing due diligence is the question of balance.  Asking questions that matter but not being that time sink. There is no right answer here, but in my view a little (no, in this case a large amount of) respect goes a long way.

What I didn't dive into at that point was the reverse - so the due diligence entrepreneurs can and should do on investors. That said I do often mention to entrepreneurs that they have as much right, and self interest, to do due diligence on us as we do on them. So I was delighted to see Bo Peabody from Greycroft flesh that out in a recent Techcrunch post.

Due diligence ... from the founders viewpoint


Bo provided a menu of 10 questions for founders to put to VCs, many of which can be tweaked and applied to the friendly angel who comes knocking. The questions are set out below and Bo's post has some commentary around each.

Is it legit to ask questions like this? I often get asked that question especially by first time entrepreneurs. As you go through the fund raising dance there is a natural sensitivity around the people with the money - that you want pretty badly. How far can you go to ask questions about them

Absolutely you can! Is my answer. This is YOUR company and YOUR future so of course it is legit. You need to make sure that you are doing the right thing for you and the business when enter into what will likely be a long term (maybe very long term) investor relationship. Also I am am pretty sure that investors think more highly of the entrepreneurs that ask these questions than those that do not. I certainly do. It is another window on entrepreneur's thoroughness and thoughtfulness as well as a manifestation of their desire to bring together an A team that will drive success. 

And investor insights can also allow you, the entrepreneur, to focus your appeal. Knowing more about an investor also allows an entrepreneur to go beyond just assessing if there will be a good "fit" They can increase the chances of making that fit happen. As the entrepreneur building your A team if you identify that you want a specific investor on board for specific reasons - things like their focus, their expertise, the way they operate - then pitch that to them. Call it flattery if you like, but you need to do what you need to do to build that A team! (Although, as one founder pointed out to me, bottom line you should "only take investors that you actually like and respect".)

Bo's Top Ten Questions 

For the record here is Bo's list:

1. How big is the particular fund that your startup will be part of and where is that fund in its lifecycle?

2. What is the investment strategy of the firm? What are the sizes of its investments and average ownership percentages? What is the firm’s reserves strategy?

3. What is the decision-making structure of the firm and where does your deal sponsor fit into that structure?

4. Who are the LP’s in the fund?

5. What is the compensation structure of the fund and how does your sponsor fit into that?

6. What is the firm’s policy and culture around corporate governance? Do they seek board seats or not? If so, what is their in-person attendance record at board meetings.

7. What is the firm’s own view of the returns likely to be generated from your deal? How does it all break out?

8. How have previous funds performed and how will that affect future fundraising?

9. How does the firm handle re-caps and private-to-private mergers?

10. How many repeat entrepreneurs does the firm have?

Tuesday, September 9, 2014

Blinkered and lacking ambition - Silicon Valley? Yes - when it comes to sexism in tech.

Blinkered and lacking ambition - Silicon Valley? Yes - when it comes to sexism in tech.


A recent techcrunch story on "how investors are trying to change the culture of Silicon Valley" brought this home to me. While no doubt well intentioned, the reported comments to my mind fall far short of what true meritocracy and disruption demand.

Indeed in its attitude to women and diversity more generally this is one area where the lesser land outside the Valley has something useful to say. Namely that even the well meaning folks inside the Valley bubble don't realize how, seen from the broader world outside the bubble, they are out of step with contemporary standards of behavior (heck even the law) and also missing an opportunity to embrace diversity and drive (and invest in) even more powerful innovation.

Disruption and the 10X change

Silicon Valley prides itself on its culture of meritocracy and vigorous embrace of disruption. This is a large part of what makes it  a huge source of dynamism for the US economy and an amazing talent magnet. We are fortunate it exists and long may it continue.

Things change and change fast in the Valley. Andy Grove's pursuit of 10X innovations seems positively pedestrian by modern Valley yardsticks now that the cloud and mobile power megaX disruption on a global scale. 

Yet in this one area the Valley culture seems steeped in the past and unwilling or unable to embrace the disruption it so prizes. Even a modest 1.1X disruption seems a tall order when dealing with sexism be explicit and unconscious, whether it be in the startup culture or on the funding side. Rather the narrative seems blinked and unambitious, indeed unValleylike! 

Before I go to the post here is a nice summary from a (New York based) founder:
"Some of the points being made are plain ridiculous and really they are just giving excuses. Most of the stuff is common knowledge that we are all taught at a very early age, if not from parents then from school."

And when it comes to fixes, there are plenty out there
But I like this one from a (New York based) VC whose response to the story was:
"It starts with the VCs ... we need to have zero tolerance in our own firms and in our portfolio companies."
Well said.

Here are some excerpts for the post ... with my counterpoints attached

1. ... many of these issues crop up because most early-stage startups don’t have a head of HR, and are sometimes being founded by people who haven’t worked in a professional situation before.

AQ: This is too easy a cop out in my view. Yes, there is a case for formal training and yes bigger "professional" firms do this. But do I really have to have a HR person and/or have worked in a "professional situation" so someone can tell me that overt sexist behavior is not appropriate in the 21st century? Especially since some of the people at fault here went to some of the preeminent educational institutions in an advanced country called the USA surely we should expect more of them? Specifically that they are accountable for their own behaviors both within the law and more general social norms.


2. ... in many cases, people don’t realize that things like harassment and the gender pay gap are illegal.

AQ: If this is accurate it is also pretty depressing. Who does not know that harassment is illegal? Who is unaware of equal pay legislation? Please tell what stone can I find these people under?

3. ... his firm does a regular audit of how many companies it has invested in that have women as leaders or founders. That number is currently about 15 percent, which might sound low, but is “surprisingly high for the peer group,”

AQ: Out performing a lousy benchmark is not really a cause for celebration but point taken. Still perhaps it's time there was a recognition that there is not a true meritocracy at work here and that numbers like these simply aren't good enough - for anybody and that wherever you are in the spectrum there is more to do. (Which, by the way, applies beyond gender demographics).


4. ... the portion of women who are founders and CEOs and the portion of women who are VCs are “inextricably linked.”

AQ: This is a pretty sad comment. Inextricably linked? Really? In defense of male VCs for a moment, this point is patronizing to them because it implies that male VCs reflexively invest in men and don't have the capacity to be objective and get past their own biases (albeit unconscious ones) and see opportunity where ever it resides. While there are a lot more female founders, the VC demographic isn't budging ... these sort of "pipeline" arguments really don't work in practice other than at a glacial pace.

5. ... it’s only a matter of time before one investment firm moves to dramatically change its own ratio. “The power move would be a high-profile VC firm announce not just one, but two female GPs”

AQ: While I under stand the sentiment and would applaud the outcome ... one female GP? Maybe even two? Surely we can be bolder, more disruptive than that? This is America! This is Silicon Valley! Time to recall Andy Grove ... and shoot for a 10X outcome.




Wednesday, August 13, 2014

Fund raising is hard for everyone, some more than others

Early Stage Fund Raising is Hard For Everyone, Some More Than Others

Three high level take aways: 

  • Hard: less than one in ten companies get angel funding.
  • Harder: less than one in 200 companies get VC funding.
  • Hardest: less than one in 600 female founded companies get VC funding


Note that in each case above (and below) for illustrative purposes the ratios compare a given subset of companies to the total number companies started in the US on average each year.


Working through the numbers:

It is easy (all too easy from the investor side of the table) to toss out the glib comment to an entrepreneur: "Well, fund raising is hard for everyone you know" when talking about the time and energy needed to secure early stage capital. And this can then be followed by cliches such as: "You need to kiss a lot of frogs when you fund raise" or "get used to a lot of people telling you your baby is ugly". (Both true but neither very inspiring!)

I thought I should check out the numbers so that, while being pretty prone to these cliches myself, I could at least have some stats on hand. So here goes. I include some additional gender stats to reinforce the point that, while it might indeed be hard for everyone, early stage fund raising is incrementally harder for women entrepreneurs: 

1. There are 800,000 "establishment births" each year in the US on average over the last 20 years or so per the Bureau of Labor Statistics. An excellent report by Kauffman and LegalZoom provides a full down load on the demographics of new business founders in 2013 - 35% being women. So women found about 280,000 new companies a year on average


2. In 2013 roughly 70,000 companies receive angel funding of $25bn from 300,000 active angels per the Center for Venture Research (CVR) at the University of New Hampshire. The CVR reports that, on average over time, only 15% of companies looking for angel funding receive it (implying that approx. 470,000 or so do actual try and get angel money). In terms of gender the CVR data shows that women constitute approx. 20% of active angels. On the entrepreneur side, of those seeking funding 23% are women … and of those receiving funding 20% are women. So of the 800,000 new companies in total less than one in 100 get angel funding.


3. US VCs invested in approx. 3,400 new cos in 2013 committing $30bn through 550 active firms according to the National Venture Capital Association. The NVCA reports that 13% of VC deals involve at least at least one female founder, up from 4% a decade ago. On the investor side only 11% of VC investment staff were reported to be women in the most recent NVCA Census survey. And the the Forbes Midas List consistently shows that 5% or less of top VC decision makers are women. (To be exact 4 of 100 in the most recent 2014 survey.) Another perspective: about 35 percent of U.S. businesses are founded by women but just 2 percent of the money invested by venture capital firms goes to women-owned firms, according to a survey by the National Foundation for Women Business Owners and Wells Fargo & Co. Looking at just the number of deals, the NVCA stats suggest about 450 funded companies each year have a female founder ... which is equates to less than one in 600 of the 280,000 companies started by women each year. (Again note that I am comparing these numbers, not suggesting that of 280,000 companies founded in any given year 600 go on to get funded by VCs in that same year!)