Venture Capitalists Aren’t Your Friends, Especially if You’re a Woman

Money remains the bottom line

Out of more than $85 billion in venture capital funding annually, only 2.2 percent goes to female founders. And every year, women of color get less than 1 percent of total funding available, according to Entrepreneur.

With stats like that, there’s not much more to be said.

If you’re a woman or a minority, please, don’t get your hopes up. You need to face facts: You’re screwed. There’s no VC money coming your way. If you’re a woman, investors run the other way.

Why? Because women have babies. Melissa Hanna was asked about her body when she went searching for additional funds for her business that she’d run successfully for three years:

“You’ve clearly got what founders are made of, but I hope you’re not planning to get pregnant anytime soon.”

Once the words were out of the white male investor’s mouth — Hanna’s words, not mine — there was no walking them back. It’s illegal to ask certain questions about pregnancy status, race, religion, etc. in a job interview, but this wasn’t a job interview, exactly. This meeting was more of a fund-raising interview.

It seems laws and standards don’t apply equally if you’re a woman.

This breaks my heart for my daughters, who want to be successful businesswomen. One already dabbles in a side business with one of her friends. Together they make clay charms and friendship bracelets. The truth is that her friend has more clay — she’s kind of like an investor — and she acts a little like one too.

While the business won’t bring in a lot of cash, it’s an excellent place to start living the American Dream. And, if she’s running a business that makes a profit and allows her to buy the supplies she needs as a kid, imagine what she’ll be doing as a teenager and as an adult.

“It is the hard days — the times that challenge you to your very core — that will determine who you are.”

— Sheryl Sandberg

If you’re running a business, especially as a woman, you need to develop a tough skin. The business world isn’t for the faint of heart. Primarily, you’re moving and acting in a man’s world, so you need to think and act like those who dominate the field. Those who rise to the top will take the world by storm.

There’s no level playing field in the venture capital world. Investors get to pick if they like you or not. If you’re in favor one minute, you could be out of favor the next minute. Rewards and risks are a high-stakes poker game. To understand better, we need to know a little about the venture capital world and how it works. Owning your own business starts with a dream.

You have dreams of building a company or a product to help people. You set out to improve people’s lives and make a difference by getting out of an office setting and being your own boss. You don’t need a specialized degree as much as you need determination and grit, because 33% of entrepreneurs have only a high-school diploma, according to SmallBizGenius.

The American Dream used to be owning your own home, but the modern version includes owning your own business and working from home. You’ve opened the doors, built your base, and earned a profit. Now you’re ready to take your startup to the next level.

Most startups never earn a profit, if you’re already making money, you’re ahead of most, and it’s going to take self-awareness, knowing who you are and what you want to accomplish, to stay on top of your game, especially on the hard days.

“You will be defined, not just by what you achieve, but how you survive.”— Sheryl Sandberg

Many Startups Don’t Make Money

One Israeli investor says, “Ninety-five percent of VCs aren’t profitable.” To consider whether to invest, he looks at business earnings through a vanity smurf looking glass. He wants to invest in companies who:

• Have 3 X ROI
• Earn millions of additional revenue within one year.
• Grow 12% return per year

The vanity smurf appeal is somewhat understandable when you consider that 75% of startups fail.

Unless you have or find big friends who have deep pockets, you’re unlikely to get funding.

And, if you get funding, the dream you started with may end up being controlled by someone else, namely your investor.

Everything is Monitored

The investor charges enormous fees to show up and monitor every move you make. Some charge a fee to sit on your board. Others charge above-market rates for the money they lend. Most of the cash you earn goes to the investor while the CEO and his/her team work for peanuts.

Your investor is not your friend and will exercise control over your business decisions.

Forget Your Scruples

This is Going to be Big says: Investors favor people who look like them.

If that thought is surprising, you may want to sit down for the next idea.

The New York Times suggests, performance over ethics is what matters most.

Investors don’t care about who you are, unless you don’t look and think like them. Moreover, they don’t care if you get inside trading secrets and put them to use as long as you don’t get sent to jail or make them look bad. Remember Martha Stewart? I’m not condoning her behavior, but your investors may look the other way on certain behavior as long as their profits keep rolling in.

Do whatever you have to do to increase their bottom line. Just make them more money. Do that, and you’re good until you’re not, or unless you get caught. You can be canceled at a whim.

They Don’t Care About You

You didn’t think you were friends, and they were investing in you out of benevolence; did you? Newsflash: You’re not friends. Don’t think you’re going out to get drinks any time soon, or ever. You won’t hang out at the social event of the year either. The occasion to do so might cost your investor a few bucks off their bottom line and stop you from working for a bit. Work hard to earn them more money, or you're replaceable.

Final Thoughts

You may have started your business to do good work, but all of that changed when you got an investor. You’re no longer in control of the thing you love. Your investors control everything you do. You work for them now, and the investors have changed the trajectory of your business.

If you’re looking for an investor, buyer beware. You may be selling your soul and everything you hold dear. You’ve bought in with Mr. Wonderful from Shark Tank, and he’s not nice at all. He’s only out to increase his earnings. He doesn’t care about you. He only cares about what your business can do for him and how much more you can increase his bottom line.

Think carefully before aligning with an investor.

Back to Sheryl. She used to be an aerobics instructor.

If Sheryl can do this, you can do this.

To my daughters and every woman business owner out there, I say, be a Sheryl.