Angel Funding for Women and Minorities
Kathleen B. Schulweis, Founder and CEO, Confidence Connections™
Several years ago, I was consulting an extremely bright woman who had a groundbreaking technology for which she was pursuing financing. Melissa appeared to have everything going for her; a solid education and a solid technology, which she was ready to turn into a business.
Melissa had secured a group of individuals -- angels --- who were interested in funding her company. However, they were dragging their feet, carting her all over town to meet this person and that person, and extending the due diligence process to unbearable lengths.
By the time she came to me, Melissa was completely confused. I saw a few possibilities:
- Her technology didn't have a clear value proposition and therefore it was difficult for the angels to determine whether it was worth funding.
- The angels were simply slow to make decisions.
- Melissa is a young, attractive Middle Eastern woman, and the financiers, who were all white and male, weren't sure how to handle her.
A Matter of Comfort
The truth is, it's hard to tell in these situations exactly what is going on. I've worked in the field of sociology for 20 years, though, and have consulted women and minorities on workplace issues throughout my career, most recently through my own business, Confidence Connections, which I founded in 2002. I have come to believe that although angel investors and venture capitalists will tell you they would invest in anyone with the right business, I have noted that most people operate on the unconscious level and are most comfortable with those who look and think as they do.
In 1998 I founded two chapters of the Forum for Women Entrepreneurs (FWE) in Southern California. The organization is dedicated to educating and training women entrepreneurs to secure venture capital. The operating premise of the Forum was that securing capital is an educational issue - learn what to do, what to say, what to have in place, and you will get the money. I think this technical training has made a difference - it appears funding is more level than it was eight years ago, and members raise more than $350 million each year to build technology and biotech companies. Melissa was one of the members with whom I worked, but unfortunately she did not raise the money she needed to move ahead with her business.
Tactics for Approaching Investors
In working with Melissa and others like her, I established some important guidelines that women and minorities should consider when pursuing angel funding for their businesses. Everyone can benefit from these directives, but based upon my years of experience, I believe that women and minorities often face higher hurdles, and therefore need to be more aware of these issues.
Don't be needy, hopeful, and trusting.
In many sales situations, it is natural to assume the person with the money is in control, but this is a very dangerous assumption. One of my clients, Terry, was seeking to build her own venture capital business but she was too timid to make the pitch and hear the responses. Even though she had the strength and skills to determine the good investments, she could not garner the trust and support of investors for herself. She over-trusted, over-hoped and was overly needy. Her fear of offending or pushing too much sent the wrong message. It is essential that you approach your potential financer with confidence and authority. You know your business and your bottom lines, and if you can convey your confidence in a simple but strong manner, they will recognize you as a leader and someone worth talking to.
Seek the right match in your industry.
Look at potential investors' portfolios, their closest advisors and business contacts, and their general history. You are looking for small signs that indicate the investor will be interested in your technology and open to it regardless of your race or gender. The right match pays dividends once you secure funding as well. I worked with one woman who had a fabulous medical technology business. It was up and running, and she was ready to move on to the next level. Once she accepted a check from her investors, they replaced her with their own handpicked CEO. Unfortunately, the investors and the new CEO did not really understand her company, and it was quickly in trouble. Luckily, instead of standing by and letting the investors kill her company, she sought out the right angel to bail her out and guide her to success. She reestablished control over the company, paid off the investors, and thrived.
Be wary of affinity organizations - they're not as easy as they look.
Do not assume that a woman or minority investor group will naturally be the right angel network to approach. All investors have the same bottom line - success; they will seek the best business opportunity and the right match. One woman with whom I worked brought her business idea to an affinity group and did not prepare her presentation in advance. She assumed they would listen to her and she would walk away with funds. Unfortunately, she failed to accomplish her goal because she came across as unprepared and unprofessional. Expect investors to honor your expertise, not your affinity.
Don't dangle - keep the process moving, and try to control it.
You need to maintain an aura of confidence and control, so don't allow your investors to cart you all over town. Like Melissa, if you are waiting for the funders to make a decision, you are not leading your business but following others. If you feel the evaluation process is unreasonable or going nowhere, call a meeting with the investors and discuss whether the match is right. This means you cannot be afraid of a rejection. Each meeting and discussion you have should be about getting to the truth, not fulfilling your funding fantasies. If you can discriminate between a long shot and a sure thing, then you can stay in the conversation and convey strong confidence and ability. By being proactive about the issues involved, you're demonstrating your professionalism and asserting your ability to run a company with your investors' money.
Present a balanced team.
Who is on your team and why? It is natural for you (like the investors themselves) to look for people who are like you for your team, but while it's OK to shake things up a little, try not to stand out as an all-women or all-minority team. Just about everyone with whom I have worked has made the serious mistake of assuming their friends and colleagues are naturally the right people to put on the team. However, a team has to represent great strengths and breadth of experience. Exercise your leadership muscles by handpicking the team based on ability, not gender or race. As you know by now, discrimination is an unfortunate fact of life. Don't let it overtly color your own business plan!
Know your market and competition inside and out.
Again, this is about proving beyond a shadow of a doubt that you are the right person to run this company and take the market by storm. I was brought in to consult with a partnership of two women who were building a very exciting product and were already achieving sales. However, they were making a critical mistake by assuming they could influence an investor based on their experience and their sales. They did not do their critical market analysis. No team is so strong as to overcome a failure to know your competition. Your business plan needs to reflect your industry knowledge and take into account every angle of the competition. Be exhaustive in these details, so that follow-up questions are minimal and nothing unpleasant is unearthed in the due diligence phase.
Take advantage of good times.
When money is flowing, it’s more likely that natural wariness and discrimination on the part of investors is low. During boom times, women and minorities have the economy on their side. Now is not the time to hold back and worry - your chances of obtaining financing are never better. Don't be afraid to ride the wave! Conversely, when money is tight, be prepared. Review the above tactics, and redouble your efforts.
Securing angel financing isn't easy for fledgling entrepreneurs. However, it is infinitely more complex for those who aren't like the bulk of the financiers, who are overwhelmingly white and male. Women and minorities need to be prepared for that reality even as they tend to company building basics expected of all entrepreneurs. Understanding and employing the tactics listed above will help even the odds.