The document discusses alternative funding models for startups beyond conventional venture capital. It outlines various types of venture debt, equity investment models, and revenue share agreements. It notes that conventional VC often results in high failure rates for startups and low returns for investors. The document advocates for funding women-led and diverse founding teams, who tend to receive lower valuations but higher returns. It encourages entrepreneurs to consider all options and ask hard questions to determine the best path forward for their particular company.
23. CONVENTIONAL VENTURE EQUITY
Well, not exactly. ;-)
https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/
24. As a whole,
the VC industry
has a poor
reputation
among
entrepreneurs.
25. 80% of all conventionally
venture-funded startups
will fail within 5 years
VENTURE CAPITAL BY THE NUMBERS
https://medium.com/ceoquest/why-80-of-all-startups-fail-and-what-you-can-do-to-succeed-328f080b22b8
26. 16% will not achieve an IPO*
or sale. They will not return
an ROI to their funds
VENTURE CAPITAL BY THE NUMBERS
* IPO = Initial Public Offering
https://www.cbinsights.com/research/startup-failure-post-mortem/
27. Fewer than 4%
will have a
successful exit
VENTURE CAPITAL BY THE NUMBERS
http://startupsusa.org/women-founded-venture-backed-startups/Report_Final.pdf
28. 28
Are VCs making mistakes
on 96% of funding decisions?
THE QUESTION IS BEGGED:
29. WE THINK NOT!
WE NEED MORE APPROPRIATE FUNDING MODELS
Photo credit: https://legaldesk.com/startup/various-funding-models-for-startups
30. Gillian Muessig and Anne Kennedy
STRIUCTURED EQUITY | REDEEMABLE PREFERRED INVESTMENTS
31. REDEEMABLE PREFERRED EQUITY
Make an equity investment as the company
becomes revenue-positive
Provide executive guidance to form a board,
increase sales and gross margins, and
advantageous Series A funding as the
company begins to scale
Company redeems the equity at a 3X
multiple. We retain the right to invest
alongside Series A investors with a 20%
discount
34. Conventional VCs invest
just 2% of capital in
women-led businesses
UNDERSERVED MARKETS
LOW COMPETITION FOR HIGH QUALITY DEALS
35. 84% LOWER ENTRY VALUATIONS
Average all-male
pre-money valuation
$400 Million
Average women-led
pre-money valuation
$65 Million
LOWER COMPETITION RESULTS IN ATTRACTIVE VALUATIONS
36. $50 MM –
Average capital
raised by women
CAPITAL EFFICIENT
$226 MM –
Average capital
raised by men
https://qz.com/work/1372843/quartz-analyzed-the-top-female-founders-to-understand-why-their-companies-are-worth-just-20-of-mens/
CAPITAL EFFICIENCY CORRELATES TO LESS DILUTION
37. Women-led startups
create 78¢ more
revenue per
funded dollar
WOMEN DELIVER MORE THAN TWICE THE REVENUE
Men-led startups
create 31¢ more
revenue per
funded dollar
https://thenextweb.com/business/2018/08/07/women-founders-get-less-funding-than-men-but-make-double-the-revenue/
GREATER ECONOMIC VALUE
38. Women-led portfolio
companies exit an
average of 1
year sooner than all
male teams
SHORTER INVESTMENT CYCLES
Image credit: https://numbermaniacs.com/represent/represent-7.7-on-a-number-line.html
TIME IS A RISK FACTOR AND A COST FACTOR
39. Female-led,
gender diverse teams
return an average of
35% higher ROI
WOMEN-LED COMPANIES RETURN 35% HIGHER RETURNS
https://www.inc.com/kimberly-weisul/boston-consulting-group-female-founders-higher-revenues.html
HIGHER ROI TO INVESTORS
42. Consider ALL the options
https://www.amazon.com/Lost-Founder-Painfully-Honest-Startup/dp/0735213321
43. Build the most effective team
Gender diverse teams | Women at the helm
Source: https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx
† gender diverse leadership teams
Anne Wojcicki, 23andMe
46. Ask hard
questions
and answer
them
What is the professional
and financial goal?
Who am I building this for?
What do I want to create?
What is my risk tolerance?
What’s the end game?
50. Hot List Criteria
• Who has invested in ‘Version 1’
of whatever you are now
building ‘Version 2’?
• Who was the lead partner
who championed that deal?
• Did they have a successful exit?
• They’re on your hot list!
54. How to
build your
brand
Listen Listen, lurk, learn…
and then comment on powerful sites
Learn Learn where your influencers hang out
Ask Ask for press coverage
Blog Blog, podcast, post
Speak Speak publicly
55. We’re raising $100MM
to fund women-led technology
companies building better ways
to live and work together.
Gillian Muessig | Anne Kennedy
partners@masters.vc