The Start-up Cycle 
Episode 3: Financing 

Show Description: 
What does it take to make it as an entrepreneur? Is it passion? Persistence? Or just a great idea and a little luck? We tap faculty and alumni from Smith School of Business, QueenÕs University, for answers to those questions and more. Take a ride through the start-up cycle in this six-part series Ð from finding your purpose, embracing risk and securing financing, to scaling and sustaining your business, and persevering when things get rough. 

Episode Description: 
You know your business idea is worth a million bucks Ð now you just have to convince someone to give you the cash to make it happen. But while some say it is easier than ever for start-ups to raise money, one question remains: whatÕs the best way to do it? We get advice from angel investor Jess Joss, Executive Director of York Angel Investors, as well as from Shyam Ramchandani, an entrepreneur with experience securing VC financing. We will also hear about the unique challenges and opportunities facing female entrepreneurs when it comes to finding funding. 

Transcript: 

00:01 [background music: The Elevator Bossa Nova]

00:06 Meredith Dault: There are those who believe that starting a business is a piece of cake. In 2014, business and finance columnist James Surowiecki wrote in New Yorker magazine that ÒItÕs never been easier to build a product and start a companyÓ. He added, ÒThanks to the boom in angel investing and crowdfunding, itÕs never been easier for start-ups to raise money.Ó ThatÕs great news if itÕs trueÉ but is it? And if it IS, how DOES a start-up get started when it comes to raising cash?  Those are the questions weÕre looking to answer in this third episode of The Start-up Cycle, which is all aboutÉ [sound effect Ð cash register]É. money. 

[theme music - John Bartman Ð Robot Gypsy Jazz]

1:01 MD: So, when it comes to financing your entrepreneurial venture, youÕve got options. 
You can use your own money Ð sometimes called Bootstrapping. 
You can opt for crowdfunding Ð which could help build your audience. 
You can also turn to business accelerators, but that can mean giving away a stake in your business. For some entrepreneurs the best option may be in calling on angelsÉ

[Sound effect: harp/angelic voices Ð record scratch]

1:24 MD: Ahem. Angel investors. Sometimes referred to as the opposite of venture capitalists, angel investors Ð who are also known as seed investors or private investors Ð put money into emerging and mid-stage businesses. Their ultimate goal, of course, is a returnÉbut for many it is the supporting role Ð rather than the payout Ð that compels them. That is certainly the case for Jess Joss. She is the Executive Director of York Angel Investors Ð as well as a QueenÕs University alumna Ð and we have reached her on the phone. Hello, Jess. 

1:52 Jess Joss: Hello, Meredith, how are you today? 

1:54 MD: Speaker 3: (01:54)
I am well thank you. So tell me: if I'm an entrepreneur, how does my relationship with an angel investor differ from my relationship with a venture capitalist? 

2:03 JJ: So, I think one of the first things that you need to remember is that, quite often, an angel's getting engaged even before you're ready to raise the money. An angel, at least a lot of our angels at York Angel Investors, are actively involved in the ecosystem mentoring through incubator and accelerator programs, and being out at early stage pitch nights, providing feedback for entrepreneurs, and coaching them and mentoring them. So, your relationship differs, I think because the angel often sees you just...youÕre post-concept, but you may not be preÉyou may be pre-revenue and you're working away and working out some of the kinks in your, in your business. And an angel starts seeing you at that stage. So, one of the things is that they have context for you know, how you are growing, how you deliver, how you continue to sort of build the relationship. And it may be, you know, six months later, it may be two years later before you invest or before an angel has an opportunity to invest in you, but they've seen you grow and have the context for how, when you set your mind to do something that you are able to. 

2:59 And as an angel, at least, uh, myself as a personal angel and York angels, we're looking for companies that are post-concept and post-revenue Ð doesn't need to be a lot of revenue, but post-revenue, and having customers actually paying you, proves that you have, you know, a market fit for your idea. And that's important. And AngelsÉI would say that a lot of them are patient capital. So, we do want a return on investment, but many of us are exited entrepreneurs that have that memory of that person that fundamentally helped us grow our business and people are looking to pay it forward. So, not only are they investing money, but they're offering that smart money so that you know, connections, mentorship, experience Ð perhaps you know, theyÕre a subject matter expert in the field that you're in and they can help you rise and grow a little bit more quickly because of some of the connections they have, or some of the experiences that they have had. And angels are very sharing that way. So as an early stage angel, you're coming in early, the company's growingÉthe reality of it is we're, you know, betting on the team. You may have a bit of a pivot as things go on, but they're building this relationship with you and it's quite close. It's our own private capital that you are, we are investing into your company and we're trusting you to babysit it and bring it back to us at some point with a nice multiple.

4:13 MD: Geez, no pressure. 

4:16 JJ: [laughter] Well, comparativelyÉif you think that pressure, try looking at it more from a VC side of things: when you've got a fund, you've got a whole bunch of limited partners that have given you the money that say, I don't really have time to be involved in this whole process, I don't really need to touch the entrepreneursÉjust go and choose the absolute best companies and get me awesome return and then do it fund after fund after fund. And each one has to be more successful than the first one. VCs are amazing and they're just, they're just further up the food chain. So, it's a little bit later on when you would go and approach a VC. And I think angels, you know, are there, while you work out some of the kinks and we absolutely want to see you succeed because if you succeed, we succeed. Um, and VCs obviously also want to see succeed. So quite often, you know, a VC coming in might be when the angels have their liquidity event and are able to exit. 

5:02 MD: Got it. Okay. So if I was an entrepreneur, as some of our listeners are, and I wanted to seek out angel funding, what's the process I would follow? What's the best course of action?

5:12 JJ: Groups all have slightly different flavors in terms of what they look for, um, how often they meet and what their screening processes. Um, from an Ontario point of view, there are 13 groups that run very similarly that are not-for-profits that collaborate and share deal flow that are spread out throughout the province. So, for an entrepreneur, I think the first step that they would want to do is probably find out if there is a group sort of close to where they are located, um, cause that's oftenÉyou, you might have connections, you might know some people that are already part of that. I think the other thing that it's important to do is to start getting involved in events in your community and whether that be start-up events or whether that be specifically sort of pitch competitions and so on, to start seeing what, what is the benchmark within your community and have an opportunity to your pitching to become more familiar. 

5:59: One thing I would always say to entrepreneurs is: as you're building your pitch deck and there's lots of information on building your pitch deck, always look at it from the investor point of view. This is why they want to invest, what they want to hear. This isn't a product demo. This is why they want to invest in the company overall and invest in you. And especially at the angel stage. You know, the product or the idea, whatever it is, that's important, but it's also the team is very important because we realize at this early stage that there's quite a possibility of a pivot. So, getting to know both the entrepreneur and the concept of product, and the market space. And um, the more opportunities you have to engage with angels before you're ready to actually seek funding, the better. So, in some communities there are eventsÉfor example, across Ontario, there's one's called Pitch It and they are free, or nearly free, opportunities where you just practice pitching and you get feedback, and there'll be angels and entrepreneurs there. 

6:48: What a great way to start networking and learnÉmeet people within your, in your community, get feedback from angels before you even need the money, and start building those relationships because it's always, it's always nice to have the opportunity to build those relationships before you need anything and to also take advice, so that you can be shaping what you are then in future going to be presenting. I think another thing that I would, uh, suggest to an entrepreneur is: the number of times per day that I have a complete stranger on LinkedIn puke out, via email, with barely a hello on, why I should invest in them and that I should call them back right away, etcetera. And so on. And these are people I've never heard of. You know, that's really, as an angel investor, you get a lot of cold approaches and a lot of them are very direct and not necessarily, you know, building trust and relationship and so on, and not even looking at what the processes that we have in place are. 

7:39 So I'd recommend, again, doing that building of relationships. And if you want to do it over LinkedIn, start by asking a question or asking, you know, commenting on an article that they may post, things like that. Start building the relationship. If you meet in person, you know, build it from that way, but please don't, you know, sort of blurt out your entire business thesis and with everything, request for a certain amount of cash in a four-line email. 

MD: Oh dear. 
8:03 JJ: I'll tell you that that's not very convincing. When there's lots of great deals around that one isn't necessarily one that's going to cause you to reach for your chequebook quickly. 

8:11 MD: Got It. What surprises you most about angel investing? 

8:15 JJ: So, I think there's been a lot of changes in the last decade. So contextually, uh, when, you know, when the angel investing, uh, economy in Canada grew, we were using a lot of Silicon Valley data. And so we were saying, oh, three to five year exits, et cetera and so on. And that's not necessarily how it has, um, has played out. And so now that we have more Canadian metrics and we're looking, you know, more like a seven to 10 year exit. Um, that is, you know, frames how people perhaps create their portfolio and sort of looking at it for the longevity of it. But I think, maybe what surprises me most about the angel investing ecosystem is, especially in the Ontario ecosystem, which is the one that in Ontario most plugged into. But you know, definitely good contacts nationally, is the willingness of people to give within this ecosystem. The opportunity for them to provide mentoring or judge a pitch competition or make introductions. There is a real pay-it-forward aspect and something that, you know, it doesn't come from a place of what's in it for me, that sort of, people are almost forgetting that. And that's the last factor. And I think there's a real belief in, in our local and national economies and the belief, in this is a transformative time for Canada in terms of how we are moving into, you know, very much, you know, a leader in different areas within tech and this is the future. Um, so I think there's a lot of idealism and optimism within the angel world, which maybe I wouldn't, um, have, you know, before I became an angel investor, I wouldn't have necessarily seen seeing those as the drivers. But I think probably the thing that surprises, not this, not surprises me the most, but it would probably surprise somebody fromÉ whoÕs not an angel investor or who hasn't been through the processes, is the amount of fun that angel investors have. We're doing this, you know, by and large, as volunteers with our own capital. And so, you have to have a little bit of fun along the way and you have to enjoy the process. So certainly, um, I can speak for myself and my group, that we have a tremendous amount of fun, some deep friendships, great, you know, opportunities to meet some amazing entrepreneurs and really enjoy the process. It's certainly not stuffy or dry. 

10:18 MD: That sounds fantastic. Conversely then, for entrepreneurs who are encountering the angel, um, ecosystem as you call itÉI mean, what do you think surprises them the most about the process? 

10:30 JJ: Well, I think sometimes entrepreneurs think that angels are going to operate like a VC. And what I mean by that is, okay, you have a meeting, you sit down, you pitch, and then the decision comes back shortly. And I think maybe they do not understand that each, or at least in our organization and most of the organizations that are structured like mine, angels are making their own individual decisions. Um, and then they have to do due diligence, whereas quite often as a VC, they're making the decision on behalf of all their LPs, um, with, you know, a few analysts helping with the due diligence, et cetera and so on. So, it can be a fairly quick process and then maybe angels aren't always as quick. But conversely, the entrepreneurs that we're dealing with are often earlier stage and you know, it may be the first time that they've gone through due diligence and so on. So, we're providing more handholding and guidance as to what we need in order to complete the due diligence. It's more different stages. Um, I think also entrepreneurs might be surprised at how much help they actually get from an angel who isn't looking for money, who isn't looking for anything but, you know, that whole sort of paying-it-forward, offering the mentorship, offering the expertise and making the introduction. That might be something that they don't necessarily anticipate. And so, you know, that's why we call it the smart money. Cause it'sÉ there's many different ways to fund your business. And there's many, um, you know, we could say cheaper ways to fund your business cause we, as angels, take equity. But on the flip side, the connections, the mentorship, etc often far outweigh the actual dollar value of what is invested. 

[end of interview]

[music]

12:17 MD: Another tried-and-true way of financing your start-up is through venture capital. Like with angel investing, it means you are letting other people gamble on your business by giving them a stake in it Ð but VC backing can give some companies the capital they need to do some serious growing. Shyam Ramchandani is someone who has embraced VC financing Ð with great outcomes. Shyam calls himself a Òserial life sciences entrepreneurÓ who has successfully founded and financed two biopharma ventures, including Analytics 4 Life Ð where he currently serves as VP of Research and Development. Shyam is also an adjunct professor at Smith School of Business, which is where he earned his MBA. He is with me in the studio. Hello Shyam. 

12:56 Shyam Ramchandani: Hello. 

MD: At what point did you know that you would require financing? 

13:02 SR: Well, I think as you eloquently put it in your intro, you're in different life cycles of your business and when it's very early, you're bootstrapping, using any resource you have to get to a point where you have confidence that you could go to someone else and ask for their money. 
So, that's really where you need to beÉis are you at a point of confidence that you know your venture has some legs and you'd be willing to risk someone else's resources. And it really is a bit of a responsibility gut check. And a lot of people may not look at it the same way I do, but I think if you can get to a point where you feel like you can responsibly use someone else's resources, it's a good time to start thinking about where you could get more, or your business is at a point where it won't grow any faster or further without a serious injection that you can't provide by yourself. But I think you have to weigh both of those things. Can you, is it at that point where it can't grow without it? And is it also at that point where you can credibly go to someone and demonstrate that ÔI can use your money, I can use your resources responsiblyÕ. 
And there's a, there's a, a potential mutual win-win there. 
14:12 MD: Amazing. So for you, how long was that journey from conception of the business toÉ?
SR: With Analytics 4 Life, we really got started, um, sort of pre-analytics for life was 2011 and then, in about a year's time, um, we formalized the business, had a few, two seed investors: one was one of the founders and one was someone we had gone to. So that was really the first time. But there had been work going on in the background maybe two to three years before that. And so, the first financing Ð the first seed financing happened in 2012 and that required about two years of real serious work. 
14:50 MD: All right. So then, so tell me more about that process then. How did you then seek out the right investors? How did you know where to go? 
SR: Like a lot of things in life, itÕs about your personal network, your past network. Uh, usually, when you're looking to borrow someone's money, your credibility is, is paramount. And so, it's people who believe in you and trust in you - so friends and family are easiest - but then that next level usually comes back to whether you have some experience with people or not, which is a conundrum for most entrepreneurs because they're usually first-timers. They're usually very young. They usually don't have a big track record. So, I think that's where your team that you build around you, someone on your team needs to have that hook. For us it was, um, it was our, one of our co-founders who was also, who had been, you know, in the tech business for 20 years, and had held high level positions at blue chip companies and had a large network and he could go to. He, himself, founded the company. So, he was bought into it. He had put his ownÉ demonstrated he put his own cash into it and was thenÉ that, that provided the seriousness and the credibility that if he's willing to do this and he knows some people, they'd be looking at himÉ and if he's willing to ask. So that's the other part is, are you willing to put your own credibility or your own personal capital, um, on the line here? Because if it doesn't work out, you know, you're, you're looking at having possibly damaged relationships that  took a long time to build. 

16:31 MD: Good point. Yikes. So how did you decide that it was the VC route was the right one for you, and not angel or another route? 

SR: So, for Analytics 4 Life, we have not technically looked for VC money yet, so we've been able to raise over $35 million, in three different rounds. And it hasn't really been friends and family either, it's been a hybrid of that where in a lot of, um, accredited investors, you'd call them angels that are, um, themselves serial angels in the cardiovascular device space. So, when they saw what we had, along with our CEO who had already done sort of the same thing seven years prior in 2008 started at a company and took it all the way to an exit of over a quarter million, sorry, a quarter billion dollars, sold to Medtronic, one of the biggest companies in the world of medical devices. It was easy for those people to follow him into our venture. Um, which sort of goes back to what I talked about before, bringing Don Crawford, our CEO, on board is that guy that allowed us his credibility and him willing to go out into his network and saying, you know, I'm working on something new, which I think is as good, if not better, than what we just did, really helped push the envelope there. 

17:53 MD: Okay. So, your first experience though, your first business, which that did go to VC? 

SR: Yes, it did. I was very na•veÉI was a graduate student at the time. I was at the bench, I was doing, you know, molecular experiments. And it turned out that my experiments ended up being the basis of starting a company called Methylgene in Montreal. And Methylgene was financed through a VC out of Boston. And in those days, um, you know, people were very interested in sort of the science and the first result and, um, you know, the market was also quite hot and it was, you know, it was a little bit of a dog and pony show, I guess, where the university took us around and shopped it around to VCs. Again, those VCs probably had a relationship with the people in the tech transfer office. So it doesn't, it isn't just, it isn't very formulaic. It really does come down to who is working with you and who do they know. And is there any, um, some mutual trust there? So even at the institutional level, the VC world is big yet very small. They all know one another, especially in their, um, sort of technical carve-outs that they're most interested in. They usually invest as syndicates. So, it's rare that you'll have one VC take on an entire investment. They usually will co-invest together and one of them will lead it and be the board member for, for the venture. So, they know each other, they've worked with each other often enough. They have their own sort of internal ways they like to do business. Uh, it's important, from the entrepreneurÕs side to know that. The more you know about what the community is looking for, and your specific people you're engaging, the better chance you have of communicating what it is youÕre doing in the light that they're wanting to hear it in. 

19:53 SR: Many times, they don't want to hear the technical stuff. They want to hear Ôwhat's your plan for going to market?Õ What's yourÉlet's give you the benefit of the doubt that it all works. Even though it works. It doesn't mean you're going to sell any of it. So how do you sell it? So, some VCs will come at it from that point of view. Others will only be interested in does it work or not because they feel they have the expertise and the network to bring a real go-to market strategy around something. So, and then that's important for the entrepreneur. Like you had said, you might be giving up some control, you're going to give up some equity. What part of the business are you going to give up controlling or look to work together with people. So, you know, you have to be very introspective about Ôis this my baby and I'm holding it all the way and I'm not letting anyone help me except give me some moneyÕ. Well, that's a tough one because usually with, with the resources comes some need to know what's going , or be part of what is going on. And um, you need to be able to manage that in order to be successful in multiple rounds of financing. 

20:57 MD: How have you found that balance? 

SR: Well, I find communicating with your investors regularly, before they ask the question, you should be in front of them saying, this is what happened this quarter. This is what happened, this is what we're doing. You have to be very methodical about that process. And if you do, you catch them before there are questions. And it also gives them the um, appropriate setting in which to ask. They know, Ôoh, in a couple of months time, I'll get a chance to ask thisÕ, instead of having, um, ad hoc shareholder meetings and ad hoc updates. Those usually come at key points in time when you want to advertise something as the entrepreneur. But really, what you should be doing is talking to your investors every quarter or every couple of months, or you have to find some sort of manageable way to do it, so that you're not doing a hundred different individual phone calls. We have over 200 individual investors at Analytics 4 Life right now. Rarely do we get a call from any of them. Because, we are out in front. We always send a newsletter. We always allow them to send email back. Um, no we don't close the door. If you want to call, please go ahead and do so. But because we're always sharing news on it, uh, religiously on a quarterly basis, um, they know that they're going to get the straight story. Sometimes the news isn't great. Sometimes the news is awesome, and that is also part of building your own credibility with the community. Because most ventures don't work, but if you can gain the trust of everyone and gain the trust that you are transparent about everything and this was, we all took a good shot at this, it didn't quite work out, that doesn't mean you're out the next time around. It actually probably says you have a better chance of being in something the next time around.

22:49 MD: Does that approach also give you a bit more control over a situation? 

SR: Absolutely, you do control the message because you know you're going to be giving one. So it, it, it's extra work, for sure, but it also gives you the ability to be a little more autonomous day to day. 

23:08 MD: But in terms of giving up a stake in the business you have and yet you're still out front. 

SR: Yes. Um, you know, some people worry about dilution of their equity, right? And reallyÉto be successful, it should dilute, but the absolute value of each share should go up at each financing. So, if I own 10% of my company and it's worth 10 cents a share, should I worry if I only own 1% of the company and now it's worth a dollar a share? I've actually made 10 times more. I may own 10 times less, but absolute valueÉ my, my position is now valued in absolute dollars 10 times more. So, you want to, you grow your business that way you, you select your moments when to finance based on important milestones hit that anyone could look at you and say, oh that's new value. That's new value. So then you look at your previous value, you set a new valuationÉsay everyone agrees. Yeah, it's worth five times more than it was last year. And so yes, each share you have will be worth five times, but you will own less and less of the company. 

24:16 MD: But as an entrepreneur, do you think sometimes entrepreneurs get in their own way because they're so married to the idea of owning and maintaining control? 

SR: There are different mechanisms of how you maintain control. So the more formal you becomeÉ you have a board of directors, usually the founding entrepreneurs, probably the CEO or someone important that would be on the board of directors. That'sÉyou maintain control by controlling the board of directors. You populate your board of directors, you select them, you let them be ratified by the shareholdersÉannual shareholder meeting. But if they're all in your camp, they all believe in your philosophy, you've still got control. Even though everyone votes, you've still got control. They're on your team, they're following your vision. You know, in, in the large public companies you hear of these hostile things happen because it is impossible to control the company at that point because there are so many shares outstanding and a few large firms can buy a lot of your shares and insist that they get to put their own member on the board and you know, and that's life in the big, in big corporate world. But in, in our, you know, pre IPO companies and early stage companies that are starting to grow, having them, having your board of directors be really bought into your vision is important. And this is where we get afraid of VCs because they have this, you know, it's probably not a fair perception but there is a perception that they come in and gut your management team and do it their way. So, you know, that's why it's important to know the track record of your VC that you're looking at ,or two or three, do they routinely do something like thisÉor was it out of, you know, there was a, they were trying to save something and there was an emergency and they had to do it. So there, there's always context to it, but then it gets boiled down to something a little too simple. I think it is too simple to say that every VC thinks they're going to come in gut your business because you guys know the technology, but you have no idea how to go to market. In many cases, that's probably true. Um, in cases where you've got a very experienced management team that's been in the business for a long time, they probably are looking at that team going, oh, we'll invest in the team, not necessarily the technology. 

[MUSIC] 

26:46 MD: You may not have heard of the American dotcom entrepreneur Aimee Kandrac, but a situation she found herself in may ring a few bells of recognition for some of you. Kendrac was seeking funding for her growing business. She did not expect the kind of responses she encounteredÉthings like ÒWhat will investors think when they walk into your office and see there are more women than men working there?ÓÉ and ÒCanÕt your husband just give you a loan?Ó 

For many female entrepreneurs, the question of accessing start-up and growth capital continues to be a sore spot. For more I am joined by Smith Business InsightÕs Alan Morantz who has been digging into some research on the subject. 

Hello Alan. 

Alan Morantz: Hello. 

MD: What is the current landscape when it comes to female entrepreneurs accessing start-up and growth capital? 

27:30 AM: Well, unsurprisingly I suppose, the playing field continues to be unbalanced for women. The stats seem to suggest that thereÕs either discrimination or deep-seated bias in funding bodies that are predominately guided by men. Women-owned companies typically receive bank loans for lower amounts and with higher collateral requirements. At the same time, all-male venture teams are four times more likely to receive funding from venture capital investors than ventures with just one woman on their team. And under three percent of the companies that receive venture capital funding have a female CEO.

MD: Yikes. ThatÕs rather depressing. What were you able to learn about why this is happening?  

28:12 AM: Well, part of this may have to do with who is doing the funding. Only 14 per cent of venture capital-funded businesses in the U.S. have women in management positions. But itÕs not only that male investors are in charge. One study showed that female angel investors also have a tendency to refuse financing to female entrepreneurs. Another study of the equity crowdfunding world showed that women investors are just as biased as men in their assessment of the competence of female entrepreneurs.

MD: If you care about inclusive business, this looks bleak. 

AM: yes, but a couple of recently published studies suggest that picture is not quite accurate. As Meryl Streep would say, itÕs complicated.

MD: Go onÉ 

29:05 AM: Well, in the first study, a team from Cornell University examined gender differences in angel financing. They closely analyzed some 500 pitches that were aired on the U.S. entrepreneur-based television show Shark Tank, and they found that women were no less likely to receive funding- but that the amount of funding differed significantly from male entrepreneurial teams. Female teams received less capital and provided more equity relative to their male counterparts, even allowing for industry and track record. 

MD: Any sense why? 

AM: Largely because the female entrepreneurs initially offered higher equity stakes and asked for less capital. So, on average, the all-female teams were willing to exchange two percent more equity stake in their company for half the dollar amount compared to the all-male teams. The all-female teams seemed to be their own worst enemies.

MD: Giving up more and asking for less. 

AM: Yup. They may have thought they were being strategic, expecting biased pushback from the sharks and adjusting their valuations accordingly. Or they may actually undervalue their companies relative to firms led by men. Whatever the reason, the researchers concluded that limitations to angel financing of female entrepreneurial ventures may be partly self-imposed.

I will add that you could see this as a good news story. If female-led entrepreneurs can be more aggressive in their valuations and their funding requests, theyÕd get better results with prospective investors. In fact, based on their Shark Tank study, the researchers concluded that, in this setting at least, women were not at risk of losing an offer if their valuations had been higher. Apparently, they were leaving money on the table.

MD: Noted. You also looked at a second study. What did you learn from that one? 

30:59 AM: Yes. The second study was also based on a pitch event. This one looked at 185 presentations made to venture capital investors at a university investment competition. The researchers, led by Lakshmi Balachandra of Babson College, wanted to know not only how women entrepreneurs did relative to men but if gender-stereotyped behaviours had anything to do with the investorsÕ decisions. 

MD: And? 

AM: Like the other study, they found that women entrepreneurs were just as likely as men to receive investor interest in their ventures. But hereÕs the kicker: investors were biased against the display of feminine-stereotyped behaviours by the entrepreneurs, men and women alike. The study showed that the investors made implicit assumptions based on these stereotypes. When investors observed masculine-associated behaviours such as forcefulness, dominance, aggressiveness, and assertiveness Ñ in men or women Ñ they perceived business competence, preparedness, and leadership. When they observed feminine-associated behaviours such as warmth, sensitiveness, and expressiveness, they perceived a lack of business competence and seriousness.

MD: So is the advice that women should Òman-upÓ if they want to attract money?  

AM: Not necessarily. Because studies have shown that female leaders in the workplace who are aggressive and assertive are dinged with negative performance evaluations and passed over for promotions. Then again, in this study at least, female entrepreneurs who behaved like stereotypical men did just fine. Maybe the entrepreneurial ecosystem operates a bit differently than the corporate ecosystem.

MD: Feels like yet another example of a double-bind for women in business. 

AM: Perhaps. For me, the irony in all this is that investors should be climbing all over each other for a chance to fund female entrepreneurs. Judging from U.S. figures, revenue and employment growth among women-owned firms outperform that of all other firms, aside from large publicly traded corporations. Once theyÕre capitalised, ventures led by women grow faster and perform better than those owned by men. 

MD: Well, thatÕs good news at least. 

AM: yes, IÕm just wondering when the bias for a great return on investment kicks in. 

Meredith: Thanks, Alan. ThatÕs Alan Morantz, editor of Smith Business Insight. WeÕll put a link to the journal articles Alan mentioned in the show notes if youÕre interested in learning more about this research. 

[Theme music up] 

AndÉ thatÕs the show. In the next episode of The Start-up Cycle, weÕll be tackling the subject of successfully scaling your entrepreneurial venture. 

In the meantime, IÕm Meredith Dault. Thanks for listening.