Tips for Finding Capital
Written by Jan Jaben-Eilon Tuesday, September 21 2010
Women entrepreneurs who look to the heavens for money to fall upon them aren’t totally off base. They shouldn’t be looking for miracles, but for angels, as individual, high-worth investors are called. That’s where the investment money is nowadays, according to Amy Millman, president of Springboard Enterprises, a Washington, D.C.-based nonprofit that facilitates women entrepreneurs in their efforts to access equity markets.
“There’s plenty of money out there,” she says, acknowledging that it’s not easy to find. But individual investors – angels – are interested in alternative financing. “They’re taking their money from real estate and putting the money into direct investments that matter to them.”
“How do you find them?” she asks rhetorically. “It’s like looking for a needle in a haystack.” She recommends that women entrepreneurs network extensively; make connections through lawyers and accountants. Another possibility is to try to enter one of Springboard Enterprises’ educational programs and forums that provide women entrepreneurs with access to investors and information about sources and uses of equity capital.
“In Springboard’s 10-year history, it has proven to be the most successful venture incubator on the planet,” says Lauren Flanagan, co-founder and managing director of Phenomenelle Angels Fund I, LP.
Since January 2000, Springboard has assisted 450 women-led companies in raising more than $5 billion in equity financing, including seven initial public offerings, and creating more than 10,000 jobs. Eighty percent of Springboard companies continue to grow as independent businesses or as part of merged entities. More than 5,000 women entrepreneurs leading software, technology, new media, consumer and business products, bio and life sciences industries have participated in Springboard forums, workshops, and equity matters seminars. And more than 4,000 investors, financiers, and business development professionals have actively participated in Springboard programs as recruiters, coaches, screeners, and attendees.
Significantly, two-thirds of Springboard alumnae are serial entrepreneurs, and 50 percent of all Springboard alumnae continue to stay involved with the organization, according to Millman.
One of the “baby serial entrepreneurs,” as she calls herself, is 39-year-old Kelly Fitzsimmons, co-founder and CEO of HarQen, a Milwaukee-based privately held web telephony company. A recipient of funding from Phenomenelle Angels Fund, Fitzsimmons has launched and sold four companies in her career.
“I do what I do because I never wanted to be in a position of being dependent on a husband,” she says, noting all the obstacles she has surmounted to become the successful entrepreneur she is. She candidly speaks of her dyslexia and being diagnosed with attention deficit hyperactivity disorder at age 36. “That’s why I’m an entrepreneur. I’m totally unemployable. I had to learn how to create a team around me with structure. I couldn’t be a lone wolf; I had to learn how to work with others.”
Relating her successful track record, including having raised $3.5 million, Fitzsimmons explains that angel capital investors are not typical venture capitalists. “All the money is from people who have been entrepreneurs. They are more patient.” For her first venture, she raised $750,000 in two hours, and was, she recalls, “nine and one-half months pregnant. I was huge. I was wandering around a venture conference. But my plan resonated, and a bidding war started.”
She acknowledges that her track record makes it easier for her to now attract funds. A Springboard alumna, she says she’s good at pitching. “I’m a salesperson by nature. I’m an investable entity. Without training, you can say all the wrong things.”
But she also notes that investment capital isn’t right for every business. “An SBA (Small Business Administration) loan or second mortgage may be ideal. Equity capital is highly overrated. It’s only good for businesses that can reach $25 million in five years. And venture capitalists want it to reach $50-$75 million in five years.”
The other part of the equation is that an entrepreneur getting equity capital must be willing to sell the company in five years. “A lot of women start their businesses from a passion. It’s their baby, and they may not want to sell,” Fitzsimmons says, noting that she understands this sentiment more now that she’s a mother of two small children.
“Only five percent of women-led companies will get venture capital, both because they are women and because of the type of businesses women generally launch,” she says. “When an entrepreneur walks in the door, a venture capitalist has a checklist, and there’s a high preference for young males with no life,” she says, referring to a single male who is willing to put all his time and energy into the business.
Fitzsimmons highly recommends that women entrepreneurs sign up with companies like Springboard. “This is vital for women entrepreneurs,” she says. Springboard’s core program is its Venture Capital Forum. The first forum was held in early 2000 in Silicon Valley. As of last year, Springboard had co-hosted 19 forums showcasing 407 women-led companies that raised more than $5 billion in equity, grants, and strategic investments.
Companies like Springboard are essential, Flanagan says, because they “select, coach, and match-make the top women-led companies. All of Phenomenelle’s portfolio companies are Springboard alumnae.” She launched Phenomenelle Angels because “women-led businesses are a hugely underserved market and there is a lack of early stage capital in general in the Midwest. Our market research showed that offering superior product/services to the underserved market of women-led companies will attract the ‘cream of the crop.’ This has been proven true. We have 10 times more qualified companies actively seeking our funding than we can currently fund.”
Other angel funding and early stage venture capital is still available, she says, mentioning another leading women-focused angel investment group, Golden Seeds in New York City.
When choosing a company to invest in, Flanagan says her fund looks first for a management team with “deep domain expertise (it’s all about the jockeys).” Second, she looks for a “huge market problem and a simple-to-explain solution with intellectual property and structural barriers to competition. Third, a highly profitable business model; fourth, a capital-efficient, go-to-market plan; and fifth, a clearly articulated exit plan.”
Fitzsimmons recalls when she tried to get an investment 12 years ago. Her father, also an entrepreneur, joined her at the meeting. When she excused herself for a few moments, the investors in the room told her father that she was “non-bankable” because she was of child-bearing age. “But no one fights harder than women on a nest,” she says now. “I bet on pregnant women every time.”
Still, she stresses that she reached her success with a lot of hard work. “I watched other women. I spent a lot of time in leadership training and to learn to be more self-reflective.” All that is important, she says, because some people “who start businesses think they’ll be in charge of their calendar, but that’s not true. And if you think you’re the boss, you’re going to fail. The board owns you, the clients own you, and the vendors own you. I see leadership as an act of service. You serve your customers, vendors, and investors. Women with the most success are velvet-covered. They know how to cultivate a network in which more people win, not just them.”
Jan Jaben-Eilon was a founding staff writer of the Atlanta Business Chronicle. Since then, she has been the international editor of Advertising Age magazine and has written for such publications as The New York Times, International Herald Tribune, Washington Journalism Review, and Consumer Reports. She is the author of soon-to-be-published (There is) Life After Cancer. Jan and her husband have homes in Atlanta and Jerusalem.
