So women entrepreneurs currently are getting about 2.5 percent of all venture capital.
It’s not the only source of funding, but it’s a really great indicator on how we
fare in the space.
And that’s a fairly commonly understood statistic.
But the statistic that I like to feature—which is the one that nobody ever talks about—is
what percentage of funding is actually going to Women of color, and that’s a much more
dismal number.
That’s actually—depending on what city you look at it’s between 0.1 percent or
0.2 percent, which is to say that women of color and companies founded by women of color
aren’t really even statistically relevant as well.
The fact that women of color and companies founded by women of color don’t really even
play in the space is particularly jarring if you think about the fact that most companies
in this country are actually founded by women of color.
So it’s bad that we’re not getting funding, but it’s particularly bad given that we
seem to be the source of innovation and probably the most entrepreneurial community of all.
So venture capital is I often call it like the house flipping version of investments,
right.
Like house flipping shows, it has become the most popular and the most visible and the
most sort of prolific version of investing that’s out there, or even of capital sources.
But there’s way more to the world of investing and securing capital than just venture capital,
right?
There’s long view investments, there’s debt, there’s crowdfunding.
There are many different options when it comes to getting funding, but the one that dominates
the headlines is venture capital.
You get to be on the cover of things when you’ve secured a big series A.
You don’t really get a whole lot of press when you secure a line of credit or a loan;
it’s just not perceived as sexy.
And yet companies need debt in order to be successful.
Companies that are women-led tend to be more successful at getting crowdfunding dollars
than they are at getting venture capital dollars.
So in these areas, funding that don’t get a lot of publicity are actually really critical
because they are doing a better job of servicing women who own businesses.
And so the thing that I always tell founders is that VC might be for you, it might not
be.
But let’s not romanticize what it is and how it works.
Please do not take venture capital from any investor, no matter what terms they’re giving
you, unless you’re willing to be fired from your own company—which is what happens to
a lot of people who end up taking venture capital.
The bottom line for me is that there are many different sources of capital.
It’s not a one size fits all regime, and we get fed one single product.
And the reality is is a smart founder has to look around to see what their other options
are.
And I would say that this is not just a “nice to have,” this is a critical, critical thing.
And part of the reason that I worry about that, there’s a hack in my book that comes
from an amazing investor called Don Rayvon, and he talks in the book about how he knows
“how this movie is going to end,” which is this idea that we don’t have enough women
and people of color getting debt, for example.
And what I’m worried about, and what he’s worried about, is that in ten years we’re
going to look back at the statistics and we’re going to see that we had too many women and
people of color accepting—blindly—horrible terms and horrible venture capital packages.
And in ten years when we look back what’s that going to produce?
It’s going to produce a whole series and maybe even a whole generation of entrepreneurs
that were disproportionately more likely to fail.
And I worry that in ten years when we look back at a statistic like that, people aren’t
going to blame an unbalanced capital stack.
They’re not going to blame the fact that people should have taken debt and they didn’t.
They’re going to look at stats that simply say that women and people of color fail at
a greater rate than anyone else.
And I want that not to be the end of our movie.
Some of my favorite alternatives in terms of getting funding are things like loans,
are things like lines of credit.
But there are some that are even less [negatively] impactful to your business.
They’re a little more work, but the country is now speckled—all the country, I can’t
think of a state that doesn’t have competitions, that doesn’t have pitch events where you
can go spend a little bit of time and energy and get money for your company—especially
in those early days—because you tell a good story, because you have a great idea and especially
money that doesn’t actually have to require that you give away equity in your company.
Another one of my favorite sources of funding is crowdfunding.
And there are a couple of different kinds, right?
There’s crowdfunding where you give people T-shirts or you presell whatever product you’re
trying to manufacture.
In that case you’re not giving up any equity.
You’re giving people good will, you’re giving people product, you’re giving people
a sneak preview into what you’re working on, and in exchange you’re getting meaningful
capital.
Women tend to be disproportionately more successful at crowdfunding campaigns.
There are different studies that say why that might be, and I suspect that it’s because
their social networks are strong, and I also suspect it’s because we’re shut out of
other forms of capital.
But there’s also equity crowdfunding where you are actually giving a piece of your company
away much like you’re doing with venture capital.
But in the equity crowdfunding space the terms tend to be better, so you’re not giving
away as much and you’re not giving away nearly as much control.