If you want to grow your company through investment, cultivating relationships with investors is the key to moving forward, according to speakers at a virtual event for entrepreneurial women Tuesday.
The event, hosted by the Waterloo Region chapter of Women in Communications and Technology, was the third in a series marking International Women’s Day 2022. This wrap-up of the Break the Bias series, sponsored by the Women Empowering Women Digital Community and attended by 90 registrants, was focused on angel investing and early-stage funding for businesses owned or founded by women.
Moderated by Danielle Graham, Managing Partner of Phoenix Fire, a women-focused angel fund, Break the Bias ranged widely, from an appreciation of the Canadian climate for women founders (it’s better than in many countries) to the importance of authenticity.
Panelists included: Donna Litt, COO of sales training accelerator Uvaro; Vicki Saunders, founder of SheEO, which mentors and supports women entrepreneurs; and Shirley Speakman, Senior Partner with Canadian cleantech venture capital fund Cycle Capital.
Litt, speaking from the perspective of one who supports women seeking capital for their own businesses, says the refrain she hears so often is “Raising money really sucks.” Many women founders fear that outside investment means a loss of control or they can’t differentiate unwelcome investments from good ones. Some feel that access to capital simply isn’t available: They may say “I don’t know how to get access to capital… it seems like it’s not accessible to me.”
Litt said it is important for women to understand how to work their network to get that access. Founders have to develop connections, by giving knowledge about their enterprise and then getting knowledge in exchange about the needs of the investor. “Using that knowledge is the path to access.”
Saunders agreed that “to me, the most important thing is relationships. Relationships are absolutely the core of everything. You can’t get access without relationships.”
Creating the conditions to build those relationships takes a lot of work, said Saunders.
For example, entrepreneurs and investors tend to stay in their own bubbles of like-minded peers. But the two groups “are rarely in the same community . . . When you blend these two things together, what you do is you create the opportunity for people to understand each other better. I’ve seen lots of investors do things that are not orthodox, they are not doing what everyone else is doing, because they understand what challenges the entrepreneur has.”
She said that entrepreneurs may themselves try to fit into what they feel are the requirements for a particular financing modality, “but private wealth can do whatever they want with their money. They can change things. They don’t have to stay in the boxes we’ve created.”
She recounted, for example, that she had heard of investors who offered 10-year loans at zero per cent interest, so that an entrepreneur could maintain control of their company. “There can be all kinds of impossible things happening when you get into a relationship together.”
Saunders said she wasn’t a fan of teaching women how to “pitch.” Saunders advised founders to “meet people where they are. Showing up in a more personalized way is the heart of the change happening here.”
Investors are as interested in new ideas as entrepreneurs are, Speakman suggested, noting that Cycle Capital has allocated a small portion of its funds to create launch pads for companies and founders that the group felt had potential. These launch pads were intended to help founders understand what they have to achieve to illustrate their potential to investors in the next level of investment, whether that is an angel group, an individual investor or a venture capital fund. The aim, she said, is a positive experience for the entrepreneur and a higher potential for success when they start approaching the major players.
Speaking to what is, and is not, working well for investment, Saunders said her experience, based on working with women in five countries, is that “Canada is doing quite well in ecosystem-building.” She noted that Mary Ng, federal Minister of International Trade, Export Promotion, Small Business and Economic Development for the past four years, “has done a phenomenal job” of looking at the ecosystem as a whole, rather than looking at individual parts. The result has been more investment activity and angel funds “popping up,” but the biases in the system that work against women remain, and “you can’t just add women and stir.” She said she’d love to see more experimentation by the investment community.
Both Saunders and Speakman emphasized building relationships with like-minded investors before you need them. “Imagine there are people out there who fit with your values,” said Saunders. “The bolder you are in owning who you are, the more clear you are about that, the more likely you are to find a better fit.”
“Being intentional and being authentic are critically important,” said Speakman. She noted that if entrepreneurs don’t want to be in an unhappy relationship, neither do venture capitalists.
Speakman said that for those thinking about investment, it “can be a fabulous and exciting journey . . . it is incredibly rewarding to do early-stage investment. I encourage you to give it a whirl.”
Focus on the value over the valuation.
A really messy capitalization table gives an investor a simple reason to refuse a request.
Beware of accepting a strategic investor – you may have just pre-sold your company.
Setting too high a valuation can set a company up for failure, should that valuation have to be downgraded.
Money is important, but power and influence are the name of the game.