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If Women entrepreneurs are a strong investment for venture capitalists, why do we shy away from the financials of running a business?

When venture capitalists invest in female entrepreneurs, the benefits are shared by everyone.
By: ASHLEY MILNE-TYTE


The day Joanne Lang first pitched her technology company, AboutOne, to an investment firm, she realized she had a logistical problem. “It was two weeks after I got out of hospital with a C-section. I couldn’t even stand up straight.” Having just given birth to her fourth son, the finer details of the pitch event had eluded her until she arrived at the venue. She asked if she could present from a chair. The answer was yes. Her pitch was a success, and AboutOne’s fundraising journey had begun.

Lang’s is one example of the unusual situations women can find themselves in while going through the funding process – a process that has traditionally been dominated by men. According to The Kauffman Foundation, women-owned companies receive just four to nine percent of venture capital funding. In fact, according to a 2010 Industry Canada report, female-owned startups tend to receive less funding of all types, from lines of credit to angel investment, than male-owned firms, although the gap shrinks when the business becomes more established. Barbara Orser of the University of Ottawa’s Telfer School of Management points to research, including her own, indicating that any differences in funding have less to do with discrimination and more to do with the fact that women are less likely to apply for outside funding than men.

Toronto-based digital media consultant Elaine Kunda has spent many years at startups, most recently as CEO of web publisher B5Media, which she re-structured before the company was sold last year. She observes that many women-owned firms are run from home and are focused on helping others. “The businesses are not born out of a desire to get rich or hugely successful,” she says. “They’re born out of, ‘Oh wow, here’s a need, I can solve it.’ [The business] then doesn’t require funding of any great capacity.”

That said, Kunda is seeing a change in her area of technology. “Since fashion became a very hot commodity online in the last five years or so, and spending has increased online, a lot of fashion startups started by females are getting [venture capital] dollars,” she says, citing New York-based Birchbox, a beauty startup, as one example. “They’ve done a fabulous job and raised upwards of $15 million at this point.”

Marnie Walker is a two-time entrepreneur who currently owns 401 Bay Center, a managed office suite in Toronto. She is also an investor with Maple Leaf Angels, an angel investing firm. Walker says from 2007 to 2012 Maple Leaf funded 13 firms; only one was owned by a woman. It recently decided to re-vamp and focus on women entrepreneurs. Six out of nine firms recently applying for funding were female-owned, and two of those are now undergoing due diligence prior to being funded. Both are in the technology space. Walker says Maple Leaf now concentrates solely on the tech sector.

“Right now there are a lot of excellent government support programs for innovation in the tech sector,” she says. “So from that point of view it just makes sense, because generally there’s a lack of capital in Canada for growth. So if a company is eligible for grants, it’s huge. That company has a better chance because they have other sources of funding.”

While Maple Leaf has decided it needs to actively attract women – not only as entrepreneurs, Walker says, but as angel investors as well – other companies have been focusing on women for some time. Golden Seeds is one of them. Stephanie Newby founded the company in New York in 2004 as an angel investment firm for women-owned enterprises. It has since grown, and now has two venture capital funds.

I believe for women the entrepreneurial sector is a tremendous one because it doesn’t have a lot of constraints. There are no glass ceilings or glass cliffs. Being an entrepreneur allows you to just go out there and do it. You create value and it will be recognized.

Newby says she founded Golden Seeds because she wants to help make companies better places for women to work. “We need to create cultures for women to get to the top and be sustainable.” If you back a female founder, Newby says, you’re helping to create a female-friendly culture.

And while Golden Seeds funds women, its investors include plenty of men. “We need men’s capital, connections, expertise and know-how. They’re all valuable for the entrepreneur. But we will always have a majority of women in the room and the organization,” says Newby.

Golden Seeds concentrates on consumer goods, life sciences and technology companies. One life sciences firm that earned its backing is researching a new drug that reverses the progress of Alzheimer’s disease. “It’s a bit of a long shot for us,” Newby concedes. “We might lose all our money, but if we win it could be a 100 times return. This one had a lot of people attracted to it feeling that at a minimum we are advancing the science.”

Joanne Lang of AboutOne, which makes family organization software, received $1.8 million in her Series A funding round, with Golden Seeds the largest funder. She believes men and women essentially have the same skills going into the funding process, but that women often have one key disadvantage: they are “less networked than men”.

Because she came in knowing no one in the investing community and with little knowledge of the process, Lang knew she needed help. She spent a lot of time practicing her pitch before tracking down “a famous investor who I knew wouldn’t invest in me but could advise me on my pitch.” She gave her pitch, and he gave his verdict: no. “He explained that it was the way I was saying things and the terminology I was using,” rather than the story she was telling about her company. Lang changed some of her vocabulary and phrasing. When she pitched to Golden Seeds, she immediately made it to the next round.

Marnie Walker of Maple Leaf Angels says many women shy away from the financial side of their business and says if they are not prepared to learn, they should steer clear of entrepreneurship. But she hopes they’ll apply themselves.


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