Interview with Jenny Kassan, Author of “Raise Capital on Your Own Terms: How to Fund Your Business Without Selling Your Soul”.
Jenny Kassan is an expert on finding investors for your business or startup that don’t fit the mold of traditional venture capitalists. She’s also a business attorney who knows all the ins and outs of funding. Too often, women and minorities feel like outsiders when trying to crack the culture of venture capitalism, according to Kassan. But the truth is, there are plenty of funders out there who will believe in your and your mission. Kassan new book is Raise Capital on Your Own Terms: How to Fund Your Business Without Selling Your Soul. Here’s what she had to say.
Can you talk about why you wrote Raise Capital on Your Own Terms?
I have been helping small business owners raise money from investors for about ten years — using creative strategies that allow them to stay true to their goals and values. Unfortunately most entrepreneurs, lawyers, and advisors still don’t know about all of the options available to them for raising money. This results in too many entrepreneurs seeking funding from investors that will push them to grow their business as fast as possible at any cost, even when that conflicts with what the business owner really wants. In other words, with these kinds of investors, business owners have to sell their soul to get the money. It is so important to me that entrepreneurs know all of the options when it comes to raising money. That’s why I wrote the book.
Recently the CEO of a major Silicon Valley lending company stepped down after years of sexual harassment allegations. There’s so much news lately about a toxic work culture for women, but clearly, there’s also a toxic culture for women entrepreneurs.
It’s true that in the world of Silicon Valley high tech and the venture capitalists that fund these businesses, there seems to be a pervasive culture of sexism. Only about 3% of venture capital funding goes to women-led businesses. That is why it is so important for entrepreneurs to know all of their options for funding. For the last ten-plus years, I have been helping my clients raise hundreds of thousands to millions of dollars without having to deal with venture capitalists. This strategy tends to lead to much better outcomes for female founders.
Why shouldn’t startup founders lean on their credit cards when they’re trying to fund their business?
For most businesses, it is almost impossible to grow a healthy, sustainable business without outside funding. Some advisors recommend you “bootstrap” your business for as long as you can — in other words, use your own resources to fund your business. While this can work in some cases, it often leads to failure. Bootstrapping can create so much stress, and force the entrepreneur to struggle and not get the help she needs to make her business successful. If your outside funding comes from your home equity or credit cards, the stress can be almost unbearable. You need other people’s money to support you as you grow your business. And you can raise these funds on your own terms from investors who see your vision and want to support you.
In your book, you talk about the average investor as being someone completely different than our image. Can you explain this?
Yes! Over 99% of the investors in the U.S. are what I call “non-professional investors.” They have money to invest, usually through a retirement account or a mutual fund, but do not spend much time thinking about investing, and may not even know it’s possible to invest in a small business. But when they learn what’s possible, they often get very excited. Investing in a small business allows them to diversify their portfolio, moving a portion of their investments off Wall Street and into Main Street. It allows them to support a business they care about that is values-aligned. Tapping into this pool of investors is the key to raising money on your own terms. You’ll find supportive investors who share your vision and won’t try to come in and take control.
Do you think it’s ever going to get easier for women — as well as minority entrepreneurs — to win venture capital? And do you think we’ll ever achieve gender parity in business?
It may get marginally easier — maybe someday 5% of VC money will go to women-led businesses, as opposed to the current 3%. I think what is even more likely to happen is that more and more women and minority entrepreneurs will raise money using more creative strategies that don’t require them to give up control and sell their soul.
Women are starting businesses at a much faster rate than men. Studies show women are excellent business leaders and return more money to their investors. I think it’s only a matter of time before women are broadly recognized as business leaders. This will happen even faster when women realize that they can get funding on their own terms!
Can you touch on the steps to finding a great investor who believes in your mission and business model?
My book outlines a six-step process to design a capital raising strategy that fits with the entrepreneur’s goals and values. If you take the time to go through these steps, you have a much better chance of finding the right investors quickly, and not wasting time with the wrong ones. Briefly:
1. Get clear on your goals and values: how much to raise, how you and your investors will some day exit the business, and what are your non-negotiables.
2. Identify your ideal investors: just as we’re taught to do in marketing, create one or more investor personas to help us focus in on the types of investors that are most likely to say yes and be a great fit.
3. Design your offering: there are so many ways to compensate investors. Unlike what many VC-oriented investors will tell you, you don’t have to sell your business or do an IPO for investors to get paid. So design an investment offering that aligns your goals with your investors’ goals.
4. Choose a compliance strategy: you can’t raise money from investors without securities law compliance, but fortunately there are many compliance strategies that allow you to reach out to a broader pool of potential investors — both wealthy and not so wealthy.
5. Create your enrollment strategy: this is where you plan what you will say to investors and what materials you’ll show them to close the deal. I never call this a pitch; I call it a conversation.
6. Prepare to address obstacles along the way: it can take 2 to 12 months to reach your capital raising goal, and you’ll likely have discouraging moments when you to give up. Prepare for these in advance so you can keep going. Persistence is the key to reaching your goal.
Learn more about Jenny Kassan at jennykassan.com