Primarily VC’s need to be proactive in their understanding and awareness of bias. We all need to acknowledge that there are a lot of good people with bad, but very human habits in this department. Bias infests every aspect of venture capital. Application, qualification, examination and selection. This is bad for those being excluded but it is just as bad for LPs whose money is being deployed without priority consideration of data and merit over comfort and familiarity. If venture capital was golf, a difficult game that emphasizes who you are and not how you play in order that everyone can stay in the club, that would be fine, but venture capital is a profession that carries a fiduciary responsibility for informed strategy in support of optimal returns and understanding bias is a crucial aspect of that job.
I had the pleasure to interview Sara Batterby. Sara is the Founder and CEO of the Equity Capital Collective (EqCo), which teaches fundraising as a skill set to early and growth-stage founders. EqCo’s mission is to offer underserved entrepreneurs, such as women, people of color and LGBTQIA access to the skills, strategies and insights they need to competently and confidently fundraise for their companies.
Over the past 20 years, Sara has founded and funded multiple companies in addition to designing and building an angel fund in Silicon Valley based on the thesis that a more disciplined and data-driven approach to seed stage investing would deliver capital more equitably to a greater diversity of entrepreneurs and improve returns for investors.
Sara advises entrepreneurs in capital strategy from seed to Series A and coaches venture fund managers in the development of portfolio strategy, investment thesis, fund structures and aggregating capital from LP’s. Her unique combination of experience as both a founder and funder make her uniquely qualified to support individuals and organizations on both sides of the funding relationship.
Prior to launching EqCo in 2017, Sara served as Founder and CEO of one Oregon’s best- known cannabis brands, Hifi Farms, and currently serves on the Board of Women Led. She advises and mentors multiple founders, teaches and speaks nationwide on fundraising and equity in capital and supports fundraising strategy for nonprofits including The Freshwater Trust. She has been recognized for her commitment to innovation in equity by the Portland Business Journal as an Executive to Watch in 2017 and as a Woman of Influence in 2019.
Thank you so much for joining us! Can you tell us the “backstory” that brought you to this career path?
My ‘journey’ has been a very circuitous path. I never formed a distinct set of career goals but rather followed my interests into a huge variety of projects throughout my career.
I have always been fascinated by finance — not so much money, but the systems of money and the dynamics of its distribution, impact and influence. I started out in technology and finance with Accenture and that brought me to the US. I started my first company in Arizona at 26 in real estate and learned the mechanics of making deals and contracts.
As a founder in the Bay Area I learned fundraising as a technical and network strength. Since then, I’ve shifted that perspective to become an advisor to founders who lack access to capital networks defined by privilege, and I am grasping fundraising as identity and entitlement.
In my experiences, I came to the realization that fundraising has always been a function of privilege and that all founders are coached to fundraise using tactics that only work within those closely held privilege domains. Introduction, pitch, due diligence, close. The fact of the matter is that this only works when the cultural and relational elements of familiarity, commonality and community are in place. It does not work for founders who are approaching these traditional capital networks from the position of an outsider.
My knowledge of early stage capital led me to believe that access to capital must be supported by fundraising as a skill set and that founders from all walks of life need tools, tactics and strategies designed to develop trust and confront bias in addition to insights that allow them to overcome the limitations of identity rooted in exclusion and scarcity. Understanding this led me to my current work; I teach fundraising as a skill set, but what I am really trying to do is support founders in establishing a level playing field with investors. The meat of my work lies in developing their internal valuation defense and gaining an authentic sense of entitlement for the resources that they need and deserve.
Can you share a story of your most successful Angel or VC investment? In your opinion, what was its main lesson?
In my work, success is a relative term. Even the best prepared and most competent female founder will deal with overwhelmingly bad odds in a world where women only get 2% of venture funds (and though this is beginning to change, it is a long-term battle).
I have seen some incredible transformations in entrepreneurs who traded uncertainty, intimidation, and anxiety for competence and a well-executed raise, but the truth is these founders rarely meet their stated fundraising goal and are often forced to do more with less, or break fundraising down into smaller increments in a never ending quest for cash.
The good news is that female founders are scrappy by necessity and their capital utilization is off the charts! For many female founders, early money usually translates into meaningful growth and value creation. Recently MilkRun’s founder Julia Niiro closed the first $200K or so of an $800K seed round having brought her company through concept, launch and into revenue. That early money pushed her into 30% month over month growth in what I believe to be one of the most innovative and venture backable food systems startups, delivering farm direct food to consumers and solving the growing challenge of insolvency for small farmers. And yet, she has struggled to complete the round despite comprehensive networking, epic pitching, TedX talking, and so-on. Our strategy adapts along with her growth and she will ultimately succeed, but the challenges are very real. Success needs to retain a fluid definition if the frustration, and sometimes hopelessness, of fundraising as a woman is to be kept at bay.
Can you share a story of an Angel or VC funding “failure” of yours? Is there a lesson or take away that you took out of that that our readers can learn from?
When I co-founded the angel fund in Silicon Valley, we developed a really incredible technology application to map strengths and risks in early stage companies based on a much more nuanced and holistic analysis of the venture than is usually applied at this stage of investing. We reengineered the application process after discovering that the standardized funnel used by Y Combinator, 500 Startups and pretty much all the other incubators and accelerators was chronically infected by unconscious bias and systematically underscoring founders that fell outside of the narrow, mostly white, all male, technical founder paradigm.
The cornerstone for the fund was one key investor who became severely ill right before we were due to call capital and the raise fell apart. I suppose that was a failure, but in the process I learned so much that armed me with a deep technical understanding of how data supports equity and inclusion in investing, making it not just the right thing to do, but the smart thing to do.
I always find myself feeling like the hit was worth the lessons, so I think failure has a lot to do with attitude and an openness to learning and growing both professionally and personally.
Was there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that?
Last year I cancelled an engagement with a fund headed up by an incredible Latinx woman with great credentials and a smart investment thesis in hardware. I had a signed engagement and a banked check but in the first meeting with her team I was laying out some of the principles of the approach that I use, many of which are somewhat relational, and trying to craft a connection with the team. Her male co-founder cut me off and asked me how long it would be before I got into “actual strategy.” I was rattled and rather than hold my ground, I tried to appease him, jumping through hoops as I see so many female founders do with investors. We finished the call and I spent the rest of the day feeling totally crappy, so that evening I sent a note to the client and let her know that I did not think I was a good fit for her team and if she was looking to represent inclusion in her role, she might want to weigh the impact of her co-founders participation in her fundraising efforts.
We had a follow up conversation and have remained in touch but I think, on reflection, that I should have stuck with it and supported her in coaching her partner towards a less arrogant and off-putting stance. I think that guy punched through my professional confidence and made me feel insecure about my expertise. Instead of working through that I just walked away and missed the opportunity to patch that particular leak in my own identity.
Ok let’s jump to the main focus of our interview. According to this article in Fortune, only 2.2% of VC dollars went to women in 2018. Can you share with our readers what your firm is doing to help close the VC gender gap?
In light of my day to day experience supporting female founders raising capital, I have a lot of ideas about how VC’s might adjust if they are so inclined. I also have some thoughts on what the rest of us should do in relation to that. I will ask for forgiveness rather than permission in sharing suggestions for VC’s and weigh on the side of what we can do to develop alternatives.
- Primarily VC’s need to be proactive in their understanding and awareness of bias. We all need to acknowledge that there are a lot of good people with bad, but very human habits in this department. Bias infests every aspect of venture capital. Application, qualification, examination and selection. This is bad for those being excluded but it is just as bad for LPs whose money is being deployed without priority consideration of data and merit over comfort and familiarity. If venture capital was golf, a difficult game that emphasizes who you are and not how you play in order that everyone can stay in the club, that would be fine, but venture capital is a profession that carries a fiduciary responsibility for informed strategy in support of optimal returns and understanding bias is a crucial aspect of that job.
- Understand that adding women is not some sort of “shake and bake” solution for changing venture capital. It’s still a chicken in there. Women are statistically just as likely to employ bias in the way they evaluate female entrepreneurs in a culturally insensitive, masculinity defined investing culture as men. The same truth applies to female participation on boards, leadership teams and so on. In research done on jury selection it was found that you need a full third minority participation to measurably alter decision outcomes within any group so unless you are planning on diversifying your team in line with those numbers, your intentions, while well meaning, will move the needle not at all.
- Acknowledge the challenge — Women struggle to raise capital at every stage. By the time they get in front of a VC their funding history, cap table, growth trajectory and so on have all been impacted by this. Asking a woman why she has struggled to raise money and has limped along on incremental financing is akin to asking her why she didn’t win the grand prize at the country fair. This is not an excuse for poor performance or bad decision making but it is a reasonable explanation for a host of challenges that come along with such limited access to capital. VC’s need to acknowledge the challenge and factor it into their assessment of a female founders path to their door.
And for the rest of us…
- Innovate! Money is exchanged in the name of innovation, but if innovation was really the goal then we would see innovation in finance and the extent to which that is absent is startling. There is one channel with one stakeholder and one ROI. Venture capital for professional elite’s focused solely on share value appreciation for other wealthy elites. If you care about diversity and you are an expert in finance, participate in a design process that supports new instruments, alternative channels and multi stakeholder returns. In short, stop trying to fix venture capital. It works just fine for the investors and the companies it was designed to serve. We need an alternative capital market system that works for the rest of us.
- Incorporate identity into your efforts to support female founders. Teaching them to pitch and introducing them to investors is valuable but it does not tackle the experiential challenge that women face fundraising from the disentitled position assigned to us in every aspect of our culture. Teach entrepreneurial efficacy and transactional competence as a bedrock for confidence and conviction and understand that the way a woman feels about raising money will have more impact on her outcome that the content of her offering.
Can you recommend 5 things that need to be done on a broader societal level to close the VC gender gap.
This is less of a list than a simple but fundamental shift in our value system.
As a society we need to develop a more nuanced understanding of the connection between gender, entitlement and access to capital. Fundraising is an area where the gender disparity is so vast that it cannot be ignored but women’s entitlement deficiency is well studied across everything from asking for a promotion, putting a hand up in class, taking credit for work and acknowledging ability on our own behalf.
I believe that awareness is the only thing that will enlighten us to it, and empathy is the only thing that will change it without the gender warfare we are seeing in the fallout from the #MeToo movement. We all need to examine our own biases, and those of us who are more comfortable with what might be a downgrade to equity from power, need to acknowledge the fear and anxiety associated with said demotion and play a supportive role.
This insight dawned on me while supporting a particular female founder through her raise. We deployed a strategy that placed her in control of the process and projected confidence to investors while her identity did the inevitably slower task of shifting onto a level playing field. One investor took umbrage at her failure to jump through hoops and be as reliably deferential as he expected and he responded by being critical and demanding. The founder crumbled and called me in a panic having taken as truth the investors assertion that if she didn’t have this or that or whatever then she was ill prepared for the process. I asked her to be polite and responsive but to hold her ground and she spent an uncomfortable night anxiously trying to rescue her self esteem. The next day, the investor emailed saying he had been mistaken and had found what he was looking for. It was not so much an apology, but an implicit acknowledgement of her right to establish and maintain her boundaries. The relationship held and they both proceeded down the path with a new world order in place.
I realized that equality is not a unilateral decision or a demand from one group to another. It is an agreement, acknowledged and honored on both sides of a relationship, that must survive the initial shock of change. That insight informs every aspect of my thinking about feminism, diversity and equity in our culture and I just try to share it with as many people as will listen to me.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
Entitlement for all.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
“Failure is a feeling long before it becomes a reality” Michelle Obama — Becoming. I think that says it all.
Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this, especially if we tag them. 🙂
It would have to be Michelle Obama. Her wisdom in and passion for equity is an inspiration to me.
This was really meaningful! Thank you so much for your time.