#TimesUpforVCs: Pipeline Angels challenges inequity in venture capital funding

Twenty years ago, I tried to raise venture capital for a Silicon Valley startup venture I’d launched with a female partner. We had Fortune 100 sponsors and a huge bank ready to invest a million dollars. They had just one requirement: we needed a venture capitalist (VC) to also invest. We thought we had it made. After all, it was the height of the dot com era, and investors were handing out money to internet startups like fun-size Twix bars on Halloween.

When we made our pitch to VCs – and they were always only men at the VC firms –they’d ask whether we had a man on our team (we did not). I doubt these same VCs ever asked whether an all-male team had any women on it.

We didn’t get our funding – and we weren’t alone.

In 1997, only 1.7 percent of the billions of dollars in venture capital invested in startups went to women-led businesses, according to Springboard Enterprises. But that was then, right?

Nope. Now, 21 years later, that percentage has basically stayed flat, at around a dismal 2 percent in 2017, according to financial data and software company Pitchbook.

So many women have said #TimesUp for the entrenched discrimination of both the formal venture capital world and the more informal angel investor community. They’re trying to change the game of funding for women and minority entrepreneurs.

#TimesUpforVCs

“I launched Pipeline Angels because there are enough white guy sharks investing in white guy entrepreneurs,” said Natalia Oberti Noguera, Founder & CEO of Pipeline Angels. “Pipeline Angels is in the business of creating more women and femme sharks who will in turn invest in more women and femme founders. ...A lot of founders, especially people of color, don't have the friends and family for the ‘friends and family’ round (of funding). I have been remixing Rihanna by saying that if we want more of us to shine bright like a diamond, we need to invest in diamonds in the rough.”

One problem facing women and people of color trying to raise money for their startups is that traditional investors are overwhelmingly male and white. That’s resulted in disproportionately low funding for women and minority entrepreneurs. Why? Because people naturally engage in “pattern recognition.” We subconsciously see patterns that appear to indicate past success and then replicate those. If, for example, an investor has made a lot of money investing in companies started by young, white, male guys who’ve graduated from elite universities, then that’s the pattern they’ll respond to – even if those weren’t the factors actually contributing to success.

“In 2012, a well-known white guy investor was asked at a conference what he looks for when investing,” said Oberti Noguera. “He answered, nonchalantly, ‘Someone like me.’…I decided to turn these concepts around…If we invest in what’s familiar, in what looks like us, then let's get more of us on the investing side…Our stats show it's working. We’re building a broader and more inclusive angel community and, in turn, we’re also building a broader and more inclusive portfolio of companies.”

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Pipeline Angels not only invests in women and minority owned businesses, it also looks for women and minority investors to fund these companies. Since 2011, Pipeline Angels has trained over 300 new investors, resulting in more than $5 million invested in more than 50 businesses.

Pipeline Angels is not alone. Many groups are widening the funding opportunities for women and people of color. Below are a few. I’d love to share info about others – just comment on my Facebook page: www.facebook.com/RhondaAbramsSmallBusiness

• Springboard Enterprises. Conceived in 1999 during the dot com era, Springboard was one of the first organizations dedicated to raising significant funds for female-led startups and also to help motivate and train women to become investors themselves. Springboard has an impressive track record, helping more than 730 women-led companies raise $8.6 billion. Springboard companies have had 17 IPOs, have generated billions in revenues, and have created tens of thousands of jobs.

• Golden Seeds. Founded in 2005, Golden Seeds is a highly respected network of more than 275 investors, mostly female, focusing on early-stage companies with female leaders. They’ve invested more than $100 million in almost 150 companies.

• Portfolia. Portfolia provides a platform to make it easier for women to invest in companies with a strong female focus.

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Rhonda Abrams is author of “Six-Week Start-Up”  just released in its fourth edition and other books for small business owners.  Connect with Rhonda on Facebook and Twitter: @RhondaAbrams. Register for Rhonda’s free business tips newsletter at www.PlanningShop.com