Three Women Entrepreneurs on Startup Funding Strategies
Women have a disadvantage when it comes to securing investments in their thriving companies. We spoke with three Canadian women CEOs about strategies to overcome it and raise that cash
“To me, I’m not a female CEO, I’m a CEO,” says Lauren Haw, CEO of Zoocasa.com, one of Canada’s top a real estate websites, which helps people buy or sell their homes. “I’ve got 52 people on the team, who don’t care that I’m a woman. I hope that most people don’t have a limiting belief that gender has anything to do with being a successful entrepreneur.”
Yet the numbers don’t lie. In 2015, women captured just 8% of Series A funds in the Bay Area, despite 24% of its entrepreneurs being female. Beyond that, women who have founded businesses have encountered jaw-dropping sexism and harassment when trying to raise money for their businesses in Silicon Valley.
The reality is that 92% of senior investment teams at top-tier venture capital firms in the U.S. are male, and they’re also mostly white (78%). Mark Zuckerberg is the stereotype of what an entrepreneur should look like; could it be that most VCs trust what they know?
Meanwhile, there’s a brighter picture in Canada, where the three largest cities (Toronto, Montreal and Vancouver) all made a recent list of top world cities for women entrepreneurs.
There are plenty of success stories within those numbers. Billy spoke with three women CEOs in search of advice on how to raise funds for a startup business. Their ideas encompass everything from how to execute a stellar crowdsourcing campaign to perfecting your pitch, to the boxes VCs tick when they’re investing in a business.
Noura Sakkijha, Mejuri
Originally from Jordan, Sakkijha saw a gap in the marketplace between precious jewellery and costume pieces, and founded Mejuri, a line of “everyday fine jewellery” to fill that gap.
Q: What was it like for you raising money for Mejuri?
A: It’s not easy to raise money for an e-commerce, Canadian company, but there’s also definitely other factors like being a woman and being an immigrant. It definitely wasn’t an easy journey.
Gender bias and colour bias is an unconscious thing: People maybe think that women aren’t in it for the long haul, that eventually they’re going to start a family. Maybe someone subconsciously thinks they can’t trust me because I’m an immigrant. But I can’t do anything about that. If an investor is of that mindset, it’s not really my battle to fight. All I focus on – and I think that other women should probably have this mentality too – is growing my company, leading by example and differentiating the product.
What do you focus on when you walk into a pitch meeting?
When you walk into the room, you should know your numbers, you should know your market and you should know your projections. And regardless of what the industry is, it becomes more of a business meeting. They’ll ask how you’re going to scale, what’s your acquisition cost, how much are you spending, what are your plans and how much you know your market. What’s the gap in the market? They’ll ask. You need to educate your investors about why you’re doing this and what problem you’re solving. If you know all of the above, it makes the conversation a lot easier.
What are some of the key characteristics investors are looking for?
They have to like the entrepreneur. Passion and persistence are very important to them. For me, it was the fact that we had a crowdsourcing model, which didn’t work, so we pivoted and made Mejuri a direct-to-consumer brand. It’s not like we ditched it. You take your learnings and you tweak them. Be open about how you failed and how you used that to better your business.
How do you find the right investors?
The most important thing is connections. Figuring out how you can also use your network to introduce you to prospective VCs, since introductions go a very long way, especially for us Canadians. If you want to raise money in the U.S., it’s not like you’d naturally have a lot of connections there. Leveraging the connections that you have to get introductions is really key.
And meeting U.S. investors is key because funds are less accessible in Canada?
It’s a lot smaller in Canada for the seed stage; I don’t think there’s a lot of seed-stage VCs. So there’s much less opportunity over here.
Lauren Haw, Zoocasa
Haw, after buying and selling a number of businesses, bought Zoocasa.com from media conglomerate Rogers and is trying to reinvent the way people buy and sell homes.
What are investors looking for when they buy into a business?
Investors make investments in industries that are big enough, with teams that are likely to be successful. They looked at Zoocasa.com and said, well, real estate is a massive industry, internationally. In Canada alone, there’s over 13 billion dollars alone in residential, resale commission.
Investors are investing in the management team and in you. Ideas are important, but execution is much more important. If you have an exceptional team, you’re prepared. You know your financials and your run rates inside and out, and the market like the back of your hand. There shouldn’t be a question they ask you that you can’t answer.
What’s your advice for women who are thinking of starting a business?
In the early stage of business development and ideation I’ve seen a lot of people be very secretive about what they want to do. They don’t want to tell their idea to anyone; they don’t want to share because they’re so afraid that everyone’s going to steal it.
The reality is, ideas are such a small part of what makes a company successful. You actually need to execute, and the people in this world that do very well with their business are the executors.
Talk to as many people as you can; really smart people who know the industry, who could, in theory, steal your idea, because they’re the people that are going to give you feedback and criticism to test your theory. If you can get that knowledge ahead of time, you won’t make those mistakes and you’re so much better off.
How did you find your investors?
We actually started by talking to people in the investment community and going to other founders who had done successful raises in Toronto already. We did a soft pitch; we talked about what we were going to do with Zoocasa, and we asked them for advice: “Who do you know that might be interested in this?”
Michael Katchen of Wealthsimple was fantastic. We told him our pitch, asked him what he thought, and who we should talk to. He introduced us to some of his investors.
I met Brice Scheschuk, who is the CEO of Globalive (and started Wind Mobile), on a judging panel, and did a soft pitch. I said, “We’re going to raise money, we’re looking for feedback, what are your opinions?” It just so happened that they sold Wind and started a fund. Globalive ended up being our lead investor.
Joanna Griffiths, Knix
Joanna Griffiths started Knix, anti-leak underwear for women that doesn’t look like it’s made for your grandmother.
What was your journey with Knix?
I went on Dragon’s Den. I ended up making a deal on the show with Jim Treliving. After the fact, I went into due diligence, and I was very transparent about the fact that I needed more money than I’d asked for on the show. (We were looking to raise a million dollars.) That didn’t seem to really be too big of an issue for Jim.
Jim and I basically ended up having conversations for nine months. In December 2014, when push came to shove, it was just more money than he was accustomed to writing cheques for, especially through Dragon’s Den.
Every investor has a different risk profile, and Jim was putting cheques of that size towards real estate deals where there was a guaranteed payoff within a shorter term. He had to pull out on Knix, which was devastating for me. I learned a lot about fundraising and the fact that a deal isn’t done until the cheque is in your bank account.
Should people be entertaining relationships with a number of different VCs?
What I’ve learned is that a lot of investors just want to keep you around or in the peripheral because if things go really well, they don’t want to miss out on a good opportunity. They’re really good at being like, “We just want to see more traction in this area.” Or, “We want to wait for this.” It’s really hard to get someone to say, “Great business, but we’re not interested.” It’s hard to get a firm no.
Entrepreneurs should definitely be entertaining a number of different investors. I wasn’t, and that was my mistake.
Knix was the highest funded Kickstarter campaign in the fashion category, ever. What makes a successful crowdsourcing campaign?
The more traction you can show in your campaign, the better.
If you can very quickly hit your target and show that you have enough money to make the product, then you gain momentum. I always advise people to set their target as low as possible, so they can hit it as quickly as possible. If you spend your whole campaign just trying to hit a goal, it becomes really challenging.
I work backwards: what’s the minimum amount of money you need to bring this product to market in the smallest way possible? If you need $70,000 to do that, then that’s your goal. You should work with the minimum you need just to make the product become a reality.
We were 100% funded in 24 hours, so we had a really great story to pitch the media; there’s a hype effect. Crowdsourcing platforms have a built-in algorithm; the more comments, views, shares and activity happening on your campaign page, the better ranking you have on the platform. Once you become a “popular campaign” sales start to snowball in a really good way.