Female Entrepreneurs, Capital and a Misguided View

If given the choice, would a venture capitalist or private equity investor be more likely to chase a deal or a skirt?

In the near 20 years I have worked in technology, I’ve had a healthy amount of interaction with equity investors. I’ve represented emerging growth companies, been an advisor to M&A transactions and IPOs, and rubbed shoulders at countless industry forums and networking events.

In no way do I gush over fat wallets, yet I do admire a professional investor’s singular focus on making money for themselves and for their limited partners.

So…I say deal, rather than skirt.

Yet, an article published last month by the New York Times entitled “Out of the Loop in Silicon Valley” portrays a different view of investor motivations.

The story authored by Claire Cain Miller explores a myriad of issues that impact the success of female entrepreneurs, technologists and entrepreneurs – such as education, personal goals related to family and the absence of professional role models. However, for the purpose of this blog post I’d like to explore Miller’s accusation that venture capitalists are inherently sexist.


The article leads with entrepreneur’s Candace Fleming’s frustrating tale of attempting to raise money for Crimson Hexagon, a start-up company she headed. She made the rounds to some 30 venture firms only to come away empty handed and insulted. (Photo: entrepreneur Candace Fleming, image courtesy of the Journal of New England Technology.)

One VC referred to Fleming as “mom.” Another made an indecent proposal involving his yacht and a naked photo of himself. While a third was more interested in discussing the impact biking has on male reproductive capabilities.

“I didn’t know things like this still happened,” Fleming told the NY Times. “But I know that, especially in risky times like the last couple of years, some investors kind of retreat to investing via a template. A company owned by a woman is just not the standard template.”

In no way do I defend the behavior of these venture capitalists. If true, their comments were completely out of line, inappropriate and degrading.

Yet, I also believe Fleming is misguided in her belief that it was her gender that tempered financial interest in Crimson Hexagon. More likely, it was the VCs conclusion that the company was tethered to a faulty business model, or Fleming was ineffective at presenting the company’s vision, strategy and growth plan.

Buried in the NY Times story is the revelation that Fleming recently resigned from Crimson Hexagon because “she had drifted too far from the creative side of the business.” Soon thereafter the company announced completion of its financing and the appointment of a new CEO.

So maybe sexist views didn’t block this start-up from much needed capital. It could have been an ineffective CEO.

Protecting Valuation

I just read an excellent interview by ExecutiveBiz’s JD Kathuria with Ted Leonsis, vice chairman emeritus of AOL and owner of the Washington Capitals.

Titled “6 Tips for Companies to Weather the Financial Crisis,” Leonsis provides sage advice on how to align business strategy, sales projections and cash conservation to ensure the ongoing viability of an emerging growth company. As someone who managed a business during the dot com collapse in 2001, much of Leonsis’ advice is right in line with my past experiences.

A point where I disagree though is on Leonsis’ counsel to entrepreneurs in the middle of fundraising to “take the money and don’t worry about the valuation.” That’s spoken like a true angel investor.

Yes…it’s a challenging market and companies need to be realistic about corporate valuation. Yet, that doesn’t mean to simply roll over to the first investor or VC who is willing to write a check. Investors represent the interests of their limited partners, not those of the entrepreneur. Their objective is to buy the largest percentage of the company at the lowest possible valuation.

At Strategic Communications Group (Strategic), a fair amount of our integrated public relations and social media work is designed to enhance a client’s corporate and product positioning to contribute to valuation. It’s a great example of how some entrepreneurs are taking proactive steps to protect their ownership.

VC Crisis Could Slow Innovation

The Dow Jones’ Scott Austin provides an interesting perspective on the recent press release from the National Venture Capital Association (NVCA) that calls the inaccessibility of the public markets a crisis for the VC industry.

Venture Capital Industry Under the Gun
http://tinyurl.com/6n3de7


Austin also cites a study from VentureSource that reports more than 1,400 companies funded during the dot com boom of the late 1990s still exist in venture firm's portfolios.

“A majority of these companies -- which received a total of about $50 billion in venture capital and employ more than 150,000 thousand people -- will have to shut down or sell on the cheap. Venture capitalists can't hold onto them forever.”

While I have seen too many instances in which venture capitalists have made decisions to the detriment of a company’s management, employees and customers, I recognize a healthy and thriving technology community is dependent upon their contributions.

And it’s more than the money they manage. VCs are prudent risk-takers and provide the funding, counsel and insight that makes innovation possible.

The VC industry needs to get well….quickly.

Internet Shadows are for the Weak

It’s no secret that the Internet has proven to be a wonderfully powerful medium to engage key audiences and stimulate debate. For public relations professionals, the movement of readers to social media outlets – such as blogs, wikis, communities, microblogs, etc. – has opened up new channels to promote high-quality content and thought leadership.

Transparency must serve as the foundation of Internet-based communications. We have to demand it. That’s because the lack of a formal peer review process in social media creates an environment in which rumor, innuendo and intimidation can easily gain the upper hand.

I find it disconcerting when a professional has to hide in the shadows when voicing an opinion on a topic. It just happened with an in-house attorney at Cisco who came clean about his authorship of a blog about patent trolling only when his identity was discovered.

Cisco Sued Because of Employee Blogging
http://gigaom.com/2008/03/24/cisco-sued-because-of-employee-blogging/

It’s occurring with entrepreneurs and venture capitalists with two Web sites that allow them to trash each other in anonymity. Aren’t they in the business of building innovation, wealth and value together?

http://www.thefunded.com/

http://www.theunfunded.com/

If you have something to say in the blogosphere, on a message board or in a social network...then do it with a strong, well articulated position. Make yourself known. Encourage debate. And blackball those who fail to live up to that standard.

Hiding in the shadows is for the weak.