Stop Bootstrapping, Stop Leaning In, and Organize

Stop Bootstrapping, Stop Leaning In, and Organize

It used to be that only men were called entrepreneurs.1 But women have been entrepreneurs for a long time.2 We have opened and run businesses out of necessity, passion, and genius. We’ve had to do it while caring for children and prior to having the right to vote. We started businesses back when we could not take out a loan without a man, and we are still starting businesses while earning 80% of what men earn.3 Maybe we weren’t called entrepreneurs, but we were doing it anyway: because we needed to, because we cared, because we knew we had it in us, or because our ideas were just too good.

Today, more and more women are launching businesses4—and this is good for everyone. As of 2017, woman-led enterprises employed nearly nine million people in the US.5 One international survey found that women are more likely to engage in entrepreneurship that has an environmental or social mission.6 More than one study has indicated that women-led businesses produce greater returns for investors.7

But, somehow, women are getting way less investment funding than men. Way less! In 2018, only 2.3% of venture capital investments went to female-founded startups.8 This isn’t necessarily because women aren’t trying (as some people claim). It turns out (surprise) that more than 90% of investment partners in venture capital firms are men,9 and (you guessed it), men prefer to invest in other men.10 One research team believes this is due to “outright sexism (explicit or implicit) [or] more subtle things, such as a desire by male investors to mentor founders who remind them of themselves.”11 Another study concluded that “[w]omen do face bias in terms of the masculine stereotype held by the majority of the male dominated investment community: during the pitch, women should ‘act’ like men and indicate masculine behaviors or they may be penalized by investor audiences for not having the qualities they believe to be consistent with entrepreneurship.”12 By contrast, according to a TechCrunch report, “[t]here is clear evidence . . . that the small number of venture firms with female founders and/or an unusually high percentage of female partners invest at elevated levels in female entrepreneurs.”13

It’s possible that adding more women to the VC mix could help balance things out.14 But maybe, for those of us who want to build a new economy, this is not the best use of our energy. As Jenny pointed out last month, the VC model is designed to enrich a few wealthy people, and it perpetuates inequality regardless of the identity of the founders that get funded.

And anyway, until the VCs include more women, assuming that will help, what are women entrepreneurs going to do? They can (a) struggle in silence and bootstrap their businesses (find out what that is and why it’s a problem here); (b) try to act more like men and lean in at meetings with VCs (which might not help much according to Michelle Obama and a bunch of other people);15 or (c) they can get off those treadmills, organize for their common goals, and do something more productive.

Women, let’s (c), get organized. Why wait for male VCs to finally decide we are worthy? We—and our mothers and grandmothers—didn’t wait for anyone to tell us we could be entrepreneurs.

Here are some suggestions. Business owners or not, we can:

  1. Invest in women-owned businesses that share our values. Investment crowdfunding platforms are a great place to start. They are easy to browse, and anyone—regardless of wealth—is allowed to invest at least something (there is a weird sliding scale based on income and net worth that you should know about). Check out these female-led, mission-driven companies on Crowdfund Mainstreet.
  2. Join investor communities that prioritize women-owned businesses. Angels of Main Street is open to everyone and is a place to learn about investing in mission-driven enterprises and be introduced to companies currently raising capital, including many led by women.
  3. Tell other women to do (1) and (2).

Are you a woman entrepreneur focused on raising capital for your business? Do you want to connect with legal and capital-raising experts and join a mastermind group of like-minded, badass female founders? Please join us at our July 2019 Retreat—Be A Money Magnet—to step into your power and get the RIGHT funding for your business.

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Will it turn investors off if you tell them about your mission?

Will it turn investors off if you tell them about your mission?

I’ve talked to many entrepreneurs who have told me they deemphasize the mission of their business when talking to investors.  They assume that investors care most about financial returns, and they worry that talking about their mission could get in the way of getting funding.

This is a terrible idea!  Most investors actually want very much to invest in mission-driven businesses that are values-aligned.  If your mission is important to you, you need to say it loud and proud. Furthermore, any investor who does not like the fact that your company is mission-driven is not a good fit for you, and you should not waste time with them.

More and more investors are coming to understand that, in the long run, mission-driven businesses are likely to be more profitable and successful.  When talking to potential investors, if you sense a lack of values alignment, it’s best to move on. Always seek out investors who are focused on your business’ long-term success, not on making a quick buck.

If you stay true to what matters most, you can and will find investors who share your vision and want to support you on your terms.

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Do you have to give up control of your company if you raise capital?

Do you have to give up control of your company if you raise capital?

So many of us have heard horror stories of founders giving up control to investors and then being pushed to do things with their business they didn’t want to do or even getting fired from their own company!  

The good news is that it is absolutely possible to raise money AND maintain control of your business.  I’ve been helping clients raise money for over 10 years, and I have never had a client who gave up control to investors!

Every business and business owner is unique — ideally, investment terms should be tailored to each situation. Unfortunately, most lawyers and finance professionals are unwilling or unable to be creative.  

You live and breathe your business, and you have a vision of what the business will look like when it has reached its ideal size and level of impact. This vision is what should inform the terms on which you accept investment. If you accept terms that are dictated by an investor, you risk sacrificing your vision, goals, and values in the name of complying with whatever the legal documents dictate.

If you structure the investment offering in a way that reflects what you value most, you will attract investors who support you, believe in your vision, and trust you to lead the business in a healthy and sustainable direction—all while YOU maintain control of YOUR business.

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Video: The Death of Venture Capitalism & rise of the #WeEconomy

Video: The Death of Venture Capitalism & rise of the #WeEconomy

Attorney & Creative Capital Queen Jenny Kassan talks about why Venture Capital models are not the right way for 99% of businesses to grow. Join the #WeEconomy and find investors for your business who love you, believe in what you give to your community, and want to see you be successful!

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How to fairly split the equity pie

How to fairly split the equity pie

You’ve founded a company and you want to bring on some helpers and compensate them with equity. How much equity should you give them?

Most founders pull a number out of a hat when making this decision and hope for the best. This can lead to lots of problems, especially when you give different amounts to different people. Someone who gets less than someone else might feel undervalued and lose motivation. Hurt feelings and resentments can poison the company culture.

One of my clients recently told me about an approach to this issue called Slicing Pie. Slicing Pie works by tracking everyone’s contributions of time, money, resources, etc. and does not split the equity until a trigger event, such as raising money from investors, occurs. This means that the equity you receive reflects the actual contributions you made to the company.

I recently drafted a legal agreement for Slicing Pie. The way it works is that all early company helpers receive an equal amount of equity, but the equity doesn’t vest (i.e. become truly owned by the shareholder) until a trigger event. The amount of equity that vests depends on how much time, money, and resources each helper ACTUALLY contributed before the trigger event.

This method of dividing equity makes so much more sense because everyone understands up front what they need to do to earn more equity – there is nothing arbitrary or unfair about it. It also serves as a great motivator for contribution.

To your success!

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As a thank you for subscribing to our email newsletter, you will receive a free copy of my ebook entitled Get the Right Money from the Right Investors.

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You’ve founded a company and you want to bring on some helpers and compensate them with equity. How much equity should you give them?

Most founders pull a number out of a hat when making this decision and hope for the best. This can lead to lots of problems, especially when you give different amounts to different people. Someone who gets less than someone else might feel undervalued and lose motivation. Hurt feelings and resentments can poison the company culture.

One of my clients recently told me about an approach to this issue called Slicing Pie. Slicing Pie works by tracking everyone’s contributions of time, money, resources, etc. and does not split the equity until a trigger event, such as raising money from investors, occurs. This means that the equity you receive reflects the actual contributions you made to the company.

I recently drafted a legal agreement for Slicing Pie. The way it works is that all early company helpers receive an equal amount of equity, but the equity doesn’t vest (i.e. become truly owned by the shareholder) until a trigger event. The amount of equity that vests depends on how much time, money, and resources each helper ACTUALLY contributed before the trigger event.

This method of dividing equity makes so much more sense because everyone understands up front what they need to do to earn more equity – there is nothing arbitrary or unfair about it. It also serves as a great motivator for contribution.

To your success!

Bridging the Gap Between Philanthropy and Impact Investing

Bridging the Gap Between Philanthropy and Impact Investing

Many philanthropists would like to dip a toe into impact investing, but they’re not sure where to start.  Below are a few organizations and projects that combine the best of nonprofits and social enterprise.  Many can accept both donations and investments (not all are currently accepting investments).

  1. Impact Assets – make a tax-deductible charitable donation and they will invest your donation in the social enterprise of your choice – investment returns grow the pool of investable assets
  2. SheEO – make a tax-deductible charitable donation and then help choose women entrepreneurs that will receive investment out of the the donated funds
  3. Force for Good Fund – 501(c)(3) investment fund offering eight-year revenue sharing notes – investing in social enterprises with a focus on women and people of color
  4. Economic Development and Financing Corporation – a nonprofit CDFI in Mendocino that raised money from the general public in California to invest in a start up wool mill
  5. RSF Social Finance – nonprofit offering investment notes to the general public – considered very low risk
  6. Nia House, a school in Berkeley – offered notes to the families it serves to build an addition; used community notes to leverage grants and institutional loans
  7. Beneficial State Bank is a for-profit bank whose stock is owned by a nonprofit foundation – bank profits go to the foundation so that it can make community grants – a great place to park your money!

Please share your examples!

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