The basics of high-tech investing
Like most solo female startup founders, I've seen investment deal terms that would make a Tijuana rug hawker blush.
Image from the incredibly quotable Sputnik ATX blog “Worst Startup Ever” Read it!
High-tech investing for female founders
A lot of women founders in high tech wish they were offered better investment deals. Only 15% of venture capital is invested in females although women-led teams generate 35% higher return on investment and 15% higher revenue.
When the deals do come through, sometimes the terms are so bad that its a paradox — as one female founder said to me recently “If they thought I was that bad at business, why would they invest in me at all?”
But I learned a long time ago, there is always a silver lining in being underestimated.
Because I always have to read the fine print of my deal structures (and thank heavens I did) — I've gotten really good at startup contracts, and I’ve acquired several consultants who are also really good at them. In other words, I’ve developed a nose for bullshit — and it applies to both investors and founders.
High tech investing for everyone
It’s actually not that hard to make a fair deal in high-tech investing.
The truth is, startups have a high degree of uncertainty. And for some people — uncertainty means "opportunity to take advantage" and for other people, uncertainty means "research and development".
A R&D mindset is what differentiates solid entrepreneurs AND VCs from the speculation crowd. Because when a deal is done right, the focus isn’t on getting rich, the focus is on developing a product that works — and selling it to the main market. The money is a byproduct of a successful product.
In startups, we call that traction.
“Traversing the Traction Gap is a unique experience for every company, but there are rules of thumb to leverage. Wildcat is packaging this experience in its diagnostic process to help its entrepreneurs make crisp decisions under conditions of uncertainty.”
— Geoffrey Moore | Author, Crossing the Chasm
When reputable investors and startup founders make a deal, they agree that both parties accept uncertainty, and both parties share profits. But they put in different kinds of energy.
Investors put in pooled money that they got from real relationships with other stakeholders who trusted them.
Founders put in reputation, domain expertise, and long-term ownership of a project with employees who trusted them.
High-tech investing conclusion
At its most basic, high-tech investing is a collaboration. Deals don't have to be a mystery. In fact, people who are good at high-tech do their best to take the mystery OUT of a deal. There is already plenty of mystery in the execution of a new idea.
So shout out to Sputnik ATX blog for taking some of the mystery out of high-tech. With a great plain-language blog and some kick-ass insights on... bullshit :)
#entrepreneur #investment #startups #todreamalife #angelinvesting #venturecapital #startupfunding
