Part 2: Acknowledging differences in how men and women build companies.
This is the second part of a two-part series. You can read the first part, here.
As I said in the first part of this series, I’ve noticed tendencies in female founders that I think partially answer the question, Why aren’t more female founders funded? None of these tendencies are “bad,” by the way. Most contribute to our collective strengths as founders and business-builders. But they speak to a mismatch in assumptions between investors and entrepreneurs. They should not be avoided at all costs but rather noticed and accounted for when necessary.
1. Women favor functionality over cool new shit; but many investors prefer cool new shit.
As an company founder I can attest to this: When my as-yet-unformed-startup held its first blogging conference, in 2005, we were simply attempting to create a meeting forum for a vast segment of the blogging population that was largely ignored. There was no business plan behind it; in fact, it was roughly six months before we thought our passion project as something other than a nonprofit (BlogHer’s first URL was blogher.org).
At my most recent event, The Scale Collective, which was created for female startup founders, I matched a later-stage male investor with a seed-funded female founder for a one-on-one chat. I wasn’t expecting a term sheet from this meeting, but this founder had received great press and a healthy amount of seed funding for her rather brilliant family finance startup; I wanted her to get a sense of what it would take to close a Series A or even B round, and this investor is known for candor with founders.
The founder was grateful for the opportunity, she told me, but seemed genuinely shaken up by the feedback.
“(The investor) said anyone could have built my platform,” she said. “There’s no new technology there.”
This founder, a former NYC media exec, admittedly had no hard-tech background. But she knew her market — parents — and the banking industry. Her passion for her product was apparent — I signed up for it a year ago after hearing about it, before there was even a completed beta. Having secured numerous national magazine articles about her company and a segment on one of the major morning TV shows, influence and subject matter expertise were her superpowers.
But no, the investor thought, her tech wasn’t innovative enough.
I think that this objection is fair. Many investors are passionate about investing in emerging tech, but there are plenty of talented, nontechnical female founders who started companies to address a problem and are tech agnostic. We find the resources to build the tech that enables our solution and leverage our other strengths to establish market differentiation.
…there are plenty of talented, nontechnical female founders who started companies to address a problem and are tech agnostic.
(Apologies in advance to the femgeeks reading this who feel I’m generalizing and whose startup aspirations really are to build cool new shit around AI/VR/AR/IoT/etc.)
And to female founders seeking to pull in top-tier VC funding: Your tech matters. If you have replicable tech, you must have a differentiated way of reaching audience, first-mover status, or valuable data that others with your tech do not have.
2. Women often have different milestones than investors.
I used to joke that the BlogHer audience was the “uncut rock cocaine of community.” No weird shit in there; 100 percent organic. We grew our audience to 100 million monthly unique visitors, without gaming numbers, buying traffic, or spending on media.
But alas no points are given in this realm for uncut rock cocaine.
While some deserve to get their hand smacked for nefarious growth-hacking practices, and value is attributed to organically acquired users, no investor would have taken issue with us buying Google/Facebook ads to supplement our traffic and ensuring we were top of the heap in the women’s digital lifestyle category, where media buyers with deep pockets look before deciding where to spend their money.
Now, if I could have a do-over, I would have allocated a nice amount of money on marketing spend. Sure, we were doing great on our own, but building mini-waves of momentum at the right time would have gotten us there sooner and triggered the hockey-stick effect that VCs look for.
And if this bit of realism is still utterly unappetizing for you, then I would look for funding sources other than VC.
3. We ask for what we think we need; and that’s often less than what a VC thinks we need.
Another bragging point we used to make was how LEAN we were. We got to be as big or bigger than others in our space for far less capital — in some instances a tenth of what our closest competition raised. I bragged about this like my Nana liked to brag about how many sets of pajamas she could make from only one bolt of fabric.
But unless you are in the hot dog manufacturing business, bragging about how much you can make with so little is far less important to a VC than how much you can grow quickly.
Of course you don’t want to blow your wad irresponsibly, but as the male peer I mentioned in Part 1 of this series also said to me: Your valuation goes down with even the appearance of slowed momentum.
What I think is uniquely feminine (or uniquely Midwestern, I’m not totally sure yet) is our/my propensity to say, “Things are great, why ask for more?” And this is a healthy propensity: Why give up equity you don’t need to? Why not see how much you can do with a bit of capital before asking for more?
Unfortunately this translates to investors as: You don’t want to, or don’t know how to, spend what you need to get to a massively large scale.
I will say that I am forever grateful for us going against this propensity in 2009 when, nine months after the 2008 market crash and kissing profitability, we decided to close a C Round. I won’t sugar coat: It saved our ass. And not because our bottom fell out, but because we had survived and needed to prepare for the next wave in our marketplace, requiring new talent, new technology, and fresh perspective.
Guys, you may not understand why this is such a revelation for us women, but trust me, it goes against our base instincts to ask for more than we think we need.
For other seemingly counter-intuitive insights into how VCs keep score, check out Elizabeth Yin’s piece on how VCs keep score.
4. We prefer base hits to risking it all for the homerun
One of my heroes, and a speaker at The Scale Collective, Sallie Krawcheck, built her company, Ellevest, on this simple fact: We women are more risk averse — more willing to forego big upside at the risk of losing our shirts in the process. And because of this we don’t invest the same way as men, just as we don’t make the trade-offs articulated in the “Bro’s Guidebook to IPO Superstardom” as willingly (that last bit I made up, not Sallie).
One of the women I advised earlier this year, a founder of an AI-powered mobile startup (and, a former fighter pilot, so not particularly averse to risk) was contemplating joining an accelerator program that would have required her to relocate and be away from her family for the summer. It was at this moment that she discovered what she was not willing to do to grow at all costs and decided not to participate in the accelerator.
And yet, this flies in the face of the narrative of “what it takes” to be a successful entrepreneur. Jason Calacanis, a supporter of female founders (though he didn’t exactly have the most welcoming live interface in the four or so times I’ve encountered him), wrote in an essay entitled, “You don’t have what it takes”:
Look yourself in the mirror and ask:
“Am I willing to sell everything I have to get one more month of payroll for my team to keep this company going?”
Then ask yourself…
“Am I willing to max out my two credit cards and go $20,000 into debt to keep this startup going?”
Then ask yourself….
“Am I willing to ask everyone on the team to work for deferred salary for the next 90 days while I try and save this company?”
If you’re not able to do those things, YOU DON’T HAVE WHAT IT TAKES.
Are all female founders not willing to risk it all? Of course not. I know when I built my first company — pre-marriage, pre-kids, pre-mortgage — I was willing to forego a real income for 18 months. But given the majority of female founders are starting companies at later stages (after building the skills, competencies, and perspectives needed for building a company, you could argue) the typical female founder — a late-30-, 40-, or 50-something — is often the go-to for emotional or even financial stability in her household.
We “risk” by working hard, and at totally inconvenient hours; by forgoing new clothes and wearing the same suit to every investor meeting, by keeping that 10+-year-old clunker, by selling our timeshare and downsizing the house, by investing in more child care, by switching to new health insurance and forgoing dental for a few years, by not heading-up the school fundraiser this year, by arranging for someone else to do pickups and drop-offs, by reducing — but not eliminating — the monthly payments going to the kids’ college funds, and by no longer hanging out with friends that associate hanging out with shopping, fine dining, or weekends in Cabo.
Or maybe that was just me and my co-founders.
5. Bullshit is not our native tongue
One of the male investors at my event provided written feedback on insights he gleaned after five one-on-one meetings he had with female founders:
“…I also discovered a pattern of how differently women founders pitch — there is more humility, more acknowledgment of challenges, more honesty. Does that hurt them in pitches compared to the guy pitches (we are awesome, we are going to be huge, no way we can fail — which make them sounds (sic) totally immature and more likely to lose my money…)
I couldn’t help but notice that the investor did not answer his own implied question: Does honesty hurt female founders? He may have appreciated our honesty and seen past male braggadocio, but what about VCs in general?
This is a conundrum I struggle with, as I think honesty is a true strength of any founder, but usually one that proves valuable in the long-term — and many startups don’t get a long-term. I think about opportunities I lost to others who were willing to “game the system,” exaggerate their numbers or appear more competent and confident than they actually were. In truth, plenty of these folks lived and prospered.
I encountered a male-founded startup who, as part of their marketing plan for launch, added views to their public-facing engagement numbers, not for investors’ sake, but to build the impression among users that the site had strong reader engagement, and thus eliciting more views. When I questioned this tactic, citing my experience building a 100-million-monthly-user community, they were earnestly incredulous: At every startup they’d been involved with, this was an expected engagement tactic and as necessary to the launch strategy as having a web server. I started wondering, in what universe had I built my company and survived?
This also made me wonder how much harder I and my predominantly female team had to work to build our numbers organically, and for potentially lower outcomes.
I’ve also seen women swatted away when they walked into the meeting with the kind of swagger you’d expect from a Type A male. There’s a nuanced middle ground that we women are expected to tread, where we impart confidence and check investor boxes of competence and pedigree while still being deferential, even humble. Most of us have the latter part nailed. It’s the former part that the majority of us lack. For most of us, this is like being a pinup Mother Theresa: An impossible idyll. And not one we necessarily aspire to.
As female executives we coach each other to make the big asks and promote ourselves, so we do, and perhaps our awkwardness shows. I belong to a women’s networking group, where seniority and a high level of business achievement are required for membership. And yet, even in this environment, any personal announcements we share on our listserv comes with the requisite hashtag: #ladybrag, to acknowledge the paradoxical state, I suppose, of being a lady who talks up her accomplishments.
Having articulated all of these “propensities” have I generalized about women? Yes. Have I generalized about men? Yes. I’ve become less concerned about that though, and more driven to explain what I think is a complex issue. And I don’t have the answers. But I do see some people and organizations chipping away at solving the problem, such as:
The Circular Board, who help women in the early stages prepare for larger scale conversations with investors;
Sandy Carter, formerly of IBM and founder of Silicon Blitz, who has been conducting research with actual female founders to come to a better understanding of our strengths, using data;
Indie.vc — part of O’Reilly AlphaTech Ventures, that focuses on doubling down on base hits and sustainable businesses;
Julia Pimsleur of Million Dollar Women, who helps women build high-income generating businesses;
Elizabeth Yin, who is helping to demystify the early stage fundraising process for all entrepreneurs;
and Dell Entrepreneur in Residence Elizabeth Gore, who espouses both revenue and impact — and self-defined growth.
Would I ever raise VC capital again? Absolutely. For some companies I don’t know any other way to grow. But my eyes are opened to other visions and other avenues. VC is no longer a do-or-die scenario to me. It’s a could-be scenario. An imperfect solution. And one that will, I suspect, look different as more women succeed on their own terms.