Let’s face facts. The world isn’t a meritocracy. People with the connections and money to get ahead start from the top. These identities can get your foot in the door,” Kathryn Finney, author of Build The Damn Thing: How To Start a Successful Business Even If You’re Not Rich White Guy. Everyone else, including women and those from lower socio-economic backgrounds, don’t have the same access.
They are entitled, privileged or not. However, they can fail and make it back. Think Adam Neumann, co-founder of WeWork, who was fired for making poor decisions and displaying reckless leadership. He raised $350 million from Andreessen Horowitz for a startup called Flow.
However, those without access can succeed even if they must work harder than those with access. Finney was able to do it. She:
- The Budget Fashionista is a media company that uses technology. To leverage her audience, she sought venture capital to launch a subscription service that sold beauty products similar to Birchbox, specifically for women of color. VCs were predominantly white men and did not show interest. She sold her company in the end.
- Became editor-at-large at BlogHer, a community events and media company where she learned about scaling venture-capital-funded businesses. BlogHer has raised more than $15.5 million in venture capital.
- digitalundivided was founded to address the funding gap for Black and Brown female founders.
- #ProjectDiane is a research project that tracks the number of Black and Brown women who have raised at least $1 million in venture capital.
- We have directly invested in startups and raised venture funds, Genius Guild.
Based on her experiences, she created Build the Damn Thing, providing a roadmap to entrepreneurial success.
It doesn’t matter if venture capitalists or angel investors know this. They judge founders based on their past experiences. This is called pattern matching, an example of unconscious bias.
Finney declared, “If your success rate is lower than theirs, then you will be deemed risky.” Pre-seed startups do not have business metrics. Angel investors and early-stage VCs follow their gut instincts. You don’t have to change how you do business when you are successful. Investors aren’t able to tap all the brilliant ideas and know-how that is out there.
Your gut instinct can limit your innovation opportunities, which is a problem. Others can see the options and have brilliant ideas to fill them. According to Richard Kerby, Equal Ventures data shows that white men manage 93%. Imagine how much innovation, job creation, and wealth creation would occur if they stopped following their pattern-matching ways.
You are an undervalued entrepreneur. It is vital to create a pathway to access. Finney said, “That makes your entrepreneurial journey more difficult.” Her tips for success:
Take a self-assessment. Identify your strengths and weaknesses. Hire people with strong skills in areas where you are lacking. Finney said, “I do a self-assessment every few months to ensure that I am focused on the right thing and have the useful resources and people around me to achieve what I need.” Finney does a fundamental SWOT analysis (strengths and weaknesses, opportunities, threats, and threats).
Understand your core values: “I use my values as my Northstar,” Finney stated. It is the basis of my decisions, especially when it comes to difficult ones. Many entrepreneurs receive lots of advice. Sometimes that advice is contradictory and doesn’t seem right. She considers whether the direction she is receiving aligns with her core values. Is it consistent with my beliefs and how I live in this world? It helps her to evaluate potential partners and end relationships that don’t align with her core values.
Decide the type of business that you want to start. Being a startup founder and raising venture capital and angel funding sounds glamorous. The truth is that 99 percent of entrepreneurs don’t raise equity financing and that most people start small businesses. These businesses can be high-growth and could generate millions, tens or hundreds of millions, or even billions of dollars. They are not suitable for venture and angel investments.
Many people claim to be the founders or cofounders of a startup. Founders of startups often start companies that have the potential to grow into large corporations. These startups are most likely tech-enabled or technology-based businesses. These companies have high initial costs and take time to gain market traction. However, they can achieve hockey-stick growth once they do. Investors who raise equity financing can sell their businesses or go public within five to ten years.
Many small businesses are local-focused. Although they may be able to use technology, it is often not central to their business model.
Learn about your financing options: Whether you are a small or large business, almost all start with a loan from the owner. If you have family and friends who can afford it, they might lend, gift, or invest in your company. You may run a rewards-based crowdfunding campaign in exchange for a product prototype or trinket. A Regulation Crowdfunding campaign (Reg CF), where you solicit relatively small investments from many people via online platforms, is also possible.
Venture capital and angel funding are common for startups. High-growth startups and small businesses can fund their businesses through revenue-based financing or invoice factoring.
Small businesses are more likely to apply for loans from banks or Community Development Financial Institutions when they need additional capital. CDFIs are one the most well-kept secrets of the entrepreneurial finance world. CDFIs were established to lend money at affordable rates to small businesses that are under-estimated and deemed too risky by commercial banks. The free assistance provided to borrowers will help them succeed. Entrepreneurs may receive technical assistance, such as help in creating a budget, producing financial statements, or improving their credit scores. A merchant cash-advance may be an option for small businesses. These loans can be costly so do your research.
Build it: Finney said, “I don’t know how many would-be entrepreneurs approach me to tell me about their amazing idea.” I ask them to show me the thing, but they haven’t built it yet. She advised her to “Get it out!”
Persistence and patience are essential: Finney stated that it would take you [an under-estimated business person] longer to succeed than privileged white men. This is not fair but it’s the truth.