Do I Really Have to Do This? Yes, and It’s the Right Thing to Do

Do I Really Have to Do This? Yes, and It’s the Right Thing to Do

Raising investment dollars for your business is one of the smartest ways to reach your long-term goals. But like most things that are worthwhile, getting investments is work. And it’s not just the work you have to put into finding your ideal investors and getting them on board.  

It’s the things you have to do so you don’t get in trouble. One thing is disclosing information about your company. If you are doing any capital raise, you have to disclose material information to potential investors1. Beyond that general requirement, what you have to disclose varies according to the type of capital raise you do. Some types of offerings require very specific information. Let’s say you do an offering under Regulation Crowdfunding. In that case, you’ve got to tell everyone in the world: 

  • what your business is
  • how you’re planning to make money
  • what you’re planning to do with the funds you get from the raise
  • how much money you made in the last two years
  • and risks that investors would want to know about before they invest

And you need to be pretty sure about all of this. You can’t guess or give answers that don’t have a reasonable basis—and you can’t make important changes after launching your campaign without telling everyone what those are. You can’t claim you are doing things that really you’re just planning to do. (Close enough, right? No.) You can’t omit important risk factors or important information because you think people won’t invest in you. 

Yes, this can seem like a hassle. Yes, it can take time. And yes, it can take money to hire someone to help you do it right.  

You can’t guess or give answers that don’t have a reasonable basis…and you can’t claim you’re doing things that really you’re just planning to do.

So you might say, “I know my company is great. Do I really have to do all of this?” Yes, you really do. If you don’t, you could get into serious trouble with the federal Securities Exchange Commission (SEC), state regulators, and/or your investors.

But disclosure is not just about staying out of trouble. It’s about building an economy that is based on trust, transparency, cooperation, and compassion. 

People don’t tend to talk about the SEC as a warm and fuzzy institution. But, believe it or not, the SEC exists to protect individuals and our economy—in part by insisting on the truth. In the 1920’s, businesses were making extravagant claims, and people from all walks of life were investing like crazy2. But then stock prices fell dramatically; banks failed; and unemployment and hunger abounded3. We entered the Great Depression in part because companies were dishonest4. The laws governing capital raises were enacted to prevent this5. 

If you’re not being straight with the people supporting you, you run the risk of cheating them. That’s no way to make a better world. 

Of course, put your best foot forward. You are one of those special people who have the courage to start a business and make a difference. Be proud. 

But don’t hide your flaws. And don’t make up reasons why you’re great. Be honest with the people willing to be by your side as you navigate the choppy waters of entrepreneurship: the people willing to take a chance on your dream.  

And seek out investors who really believe in you, who know that no one is perfect, and who know that the future is unpredictable. I guarantee that they are the ones who will have your back when the going gets tough. 

We can’t control the future, but we can control how we treat each other now, and we can work toward a future where we all can thrive. 

Be well, stay safe, and keep going. You can do it.

P.S. If you want help figuring out how to raise money and stay out of trouble, give us a shout. We can help you with marketing, deciding what investment to offer, complying with those pesky laws, and coaching you so you can keep your head in the game no matter what’s going on in the world.

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.