Published in the San Diego Union-Tribune, October 11, 2021
When Lada Rasochova was raising money for an acne product, she was pitching primarily to male investors. “Even though 60 million Americans are afflicted with it today, the men in the room thought it was only a woman problem, even if they had it as teenagers themselves.”
Acne is slightly more prevalent in adolescent girls, but not by a wide margin. In other words, the problem cuts across age and gender. Rasochova, Ph.D. founder and CEO of her skincare company, DERMALA, needed an informed investor. When she met True Wealth Ventures, an Austin, Texas-based venture firm led by women, it quickly recognized the value and participated in the company’s $6.73 million Series A financing. Square pegs need square holes.
Rasochova’s experience exemplifies the good news/bad news for women founders and co-founders. The good news: They are raising more venture capital than ever, approximately $25.1 billion in the first half of 2021. More good news. A growing number of women are both angel investors and partners in venture capital firms. So, it seems we are seeing more founder-investor market fit.
Now the bad news: Female founders’ share of total venture dollars raised remains unchanged. More bad news. Many women are developing products for women, yet they rely on advice and feedback from men who may not understand the significance because they haven’t walked in a women’s shoes (high heels or flats).
This disconnect is the subject of a research paper, “Biased Sampling of Early Users and the Direction of Startup Innovation,” by Harvard Business School professor Rembrand Koning and postdoctoral fellow Ruiqing Cao. They conclude that it’s important for entrepreneurs to receive feedback from early adopters who are demographically similar to their target users, and women are at a disadvantage because they often don’t. Hard to argue with that.
I asked other San Diego women founders about their money-raising experiences.
Sabrina Martucci Johnson, founder and CEO of Daré Bioscience, credits her success to years of experience in the biotech industry. “I’ve also been fortunate to have great male mentors like Bill Rastetter (founder of several biotech companies) who serves as our board chair and is a champion for women’s health issues,” she said.
When starting Daré, Johnson figured out a clever way to raise money. She went public with a reverse merger (contact your friendly attorney for details).
“I’ve learned that I have to make what we do relatable to investors, and we have to find ways to make them comfortable. So when we talk about our hormone-free contraceptive, we juxtapose it with a condom. We have to use words, like vagina, that many people don’t use in mixed company even though we’re accustomed to talking about erectile dysfunction and prostates,” she said. Johnson’s strategy has worked. So far, Daré has raised $130 million.
Before starting child care software company Tootris, Alessandra Lezama led the re-engineering and exponential growth of AbacusNext, where she raised money from private equity firms. “I was successful because I had a track record. When I took the position at Abacus, it had been in business for 30 years and had never broken $5 million in revenue. In a few years, we broke $20 million before raising private equity,” she said.
At Epitracker, Stephanie Venn-Watson, co-founder and CEO, faced a different hurdle — dealing with concerns about investing in a wife-husband team. Her husband Eric is co-founder and serves as the chief operating officer. They have overcome this resistance because of their extraordinary qualifications. Stephanie has degrees in neuroscience, veterinary medicine and public health and worked for the military. Eric, a U.S. Navy veteran, served 21 years as a military physician, then earned his MBA and held senior executive positions in healthcare.
Epitracker has discovered over 200 molecules based on data from Navy dolphins, and then did a spinout, Seraphina Therapeutics, that raised $6.2 million, led by local venture investor Kim Kamdar at Domain Associates. “Kamdar is my mentor, and she understood and promoted that a husband-wife team could be an advantage in this case,” said Stephanie.
One easy conclusion is that women founders need to find women investors, but I have a different twist. Male investors should expand their thinking to include women founders and products for women.
Rule No. 685:
Don’t ignore half the market.