San Diego Startup Week’s “Badass Women Founders Raising Capital” panel featured Cheryl Goodman, Head of Corporate Communications at Sony and recent Executive Director of Athena San Diego, as moderator and the panelists included female entrepreneurs Sabrina Johnson (DARE Bioscience), Kim Folsom (Founders First Capital Partners, LLC), and Lucy Beard (Feetz Inc).
The keynote the previous night was about women who invest, this panel was about women who have raised money for their companies.
Cheryl Goodman is also Chief Innovation Evangelist at Sony and in charge of a new $100M fund for innovation. She said taking gender out of the equation is very important to the innovation economy.
Sabrina Johnson talked about her company going public recently, three years after founding it (DARE Bioscience, a clinical-stage biopharmaceutical company committed to the advancement of innovative products for women’s reproductive health). She first did a friends and family financing round, then angel investors, then she found venture capital was a male audience and reproductive health is not a health care issue they understand or focus in, so that was a problem. She said there are lots of early funders for reproductive or other products for women, like the Gates Foundation, but without industry support those companies can’t secure further financing to grow and move forward. Sabrina said she knew she couldn’t go the normal IPO route with DARE so she did a reverse merger with a failing company, changing that company’s name and everything associated with it into the DARE name. This deal closed last July and it was a pivotal milestone of $10M. At that time DARE only had one product, now they have several in development and an additional $10M invested.
Kim Folson of Founders First Capital Partners, LLC said this is her 7th venture, the others were tech. She said the recent discussions about new sources of capital for women are in the news but the amount is still so small. “We still have a decade to go unless you are willing to go outside of the financing norm.” Outside of the norm includes going outside of San Diego for financing, as she said that the #1 industry in San Diego is tourism, while the #1 industry in NYC is finance. She can count the number of $10M businesses in San Diego from women and minority founders on one hand, which is not good! Startups need capital and resources to grow to become 6 figure businesses and then be able to pursue investments/capital. These new businesses need execution support, and access to 7-9 figure follow up capital to keep growing. These are currently missing in San Diego, along with the ability to be around people comfortable with writing $10M checks, people who may look a little different than the founder. Kim discussed the importance of finding mentors who have gone on their founder journey already, especially if you haven’t founded a company before.
Lucy Beard (Feetz Inc, 3D printed shoes made for you) said the first thing you have to do is commit. “Quit your job and be all in.” A local founder’s institute is a 4-month program at night which allows entrepreneurs to get a network of mentors. At the end of 4 months, the institute says to quit your job, which not many people do, but Lucy did. “I put my house on Airbnb and lived on a tent on the beach. I was all in, with no money coming in. Once you commit and say you’re all in, it’s easier. If you’re passionate about your idea, people see that. The first money that comes in is about you.”
Sabrina said her industry, biotech, is predominately men and in life sciences she’s 1 of 2 women CEOs in San Diego. “Women need support and resources to know how to do it and need support by surrounding yourself with the right people for encouragement and connections.” She mentions resources like Athena and Hera Hub. Her legal support, accounting, PR, etc. all came through her network. “I wasn’t afraid to ask, and they all gave.”
Kim said, “If you’re not tech or bioscience, how do you persevere here?”
Kim followed up by saying the dynamics have changed, women are now more than 50% university grads now, and 60-70% of grads in her industry. “Many these women are starting businesses, but without resources they continue to be microbusinesses that won’t support them. Solopreneurs are not job creators, and we need to be job creators.”
Lucy said she started her business to solve a genuine problem, in an industry she knew nothing about. She couldn’t find shoes that fit. She urged the audience to redefine failure. “For 7 years I went to events like this but never had the confidence to do it because I thought I would fail. One day I said ‘f*&^ it, I’m redefining failure. I just wanted to be able to look in the mirror and ask did I do the best I could do? Did I try?”
Lucy said she treated Feetz like it was either a billion-dollar business or nothing, because first she needed a few million dollars to develop the 3D printing tech. She met with 300 investors and did 300 event pitches in 1 year. Her first check came from a women’s group fund in Tennessee and she advised founders to looks for supportive investors and not just checks. Lucy sold the tech of Feetz to a private equity firm so it is not making sales at the moment. “There are so many ways you don’t get money. I didn’t pay myself for 3-5 years, I should have paid myself.” She said women need to know how to ask or demand.
Kim said for revenue-generating businesses, Founders First has a bootcamp for earning a quarter million dollars in revenue. “Women need to learn about ‘f&*k off’ money. Own enough of your business so when you exit, you don’t have to find something else to do to run your life. You need to build wealth. Our fund doesn’t take equity [of companies it invests in], it takes revenue so you OWN your business.”
Sabrina spoke about serendipity playing a role, and said after the original money came in for her company when she quit her job to make her dream happen. She did not know how to raise money privately, but had raised money publicly as CFO of large companies. The day she quit she ran into a board member in the elevator who was smiling. He said he just stepped down from his company that day to mentor new entrepreneurs and he offered to write her first check. “Because I am woman and stupid I said no, but later I called him and he still did write the check, then the first $800K came from his network, and he is still a champion and supporter. You have to kiss a lot of frogs, you never know who could be the one person to invest.” She said it’s important to tell everyone about what you want, what you’re doing, and your goals, you never know who knows who and who could be the one to help.
Cheryl asked about putting your own money into your business. Kim said you have to prove you put skin in the game. “Don’t wait for someone to write a check.”
Sabrina said having fully-formed story for your business is important when seeking funding. “You only get one first impression to make people invest in you, and they want to know you have a vision you can articulate.” What she didn’t have in place were the products because she couldn’t make them without money, it was a catch 22. Sabrina also said that raising the first money was harder than raising the following rounds. “You need to have a clear vision of what you want and what that money will go towards in order to execute that vision, such as ‘This money will do ABC and that is going to XYZ for the business.’”
When asked how important a rock-solid advisory board is to have in place before raising money, Kim said that some boards have not been helpful and suggested getting out of San Diego because many health centers are desperate for innovation. Sabrina said it better to have one good advisor that a whole board, to have someone who can speak eloquently on your behalf about your mission. Lucy said advisory boards can be one of the best ways to prove traction because their salary is small, a percentage of equity, so it proves you can hire people. After she moved to Tennessee, she asked about people in the footwear business and someone said, “I know this guy named Uli,” who turned out to be the CEO of Reebok, became her mentor, then became an investor after he watched her for a while. On building an advisory board, Sabrina said to look at what your needs are and find people doing that, send cold emails for specific expertise that you need. “Be sincere, passionate, and share your vision.” Lucy said you can use email or Linkedin but your advisory board is about you so go to events and meet people. Kim said to not reinvent the wheel, look at aspirational companies and see what they have on their board because unlike when she started, today there is an internet where you can find these things out about companies.
Asked about what feedback she used for her pitch deck after 300 pitches, Lucy said to listen to recurring themes, tell your advisors to give honest feedback, and that harsh feedback is often the best feedback. Strangers give better feedback since they are not invested and if investors don’t “get it,” it’s OK, that just means they aren’t your people. Before pitch conferences, she would have friends tear apart her pitch decks so she could improve them before she attended and she would be prepared for common questions.
About the startup landscape in San Diego, Kim said it is growing, there is room for opportunity, and a need for more resources for women-owned companies. “There are 3 million people in San Diego but I see the same 100 people all the time at events, everyone is silo’d in their own industry and it not as diverse and open as the Bay Area.” Sabrina said the landscape is industry specific, the networking events are all the same people and suggested going outside those events to network. Kim said, “If you’re not tech or biotech you’re ‘other’ and ‘other’ doesn’t have enough of an industry support system to sustain opportunities.”
On a question about how men can help forward the conversation, Kim said to take 3-5 underrepresented founders and champion them on an ongoing basis. Take them with you to networks they may not otherwise have access to. She asks her network to help her set up meetings when she travels to places like New York. Sabrina said there are three men and her husband behind her and helped her to get where she is today, they opened the door to opportunities. “I’m awesome and I think I did a great job but I would not be where I am today without those men.” Lucy said to grow strong daughters and champion women. “When you hear a woman say, ‘I have a dream,’ tell them you want to be the one to speak with them weekly to get it done.”