Karen Cahn knows how hard it is for women to get a startup funded, because she was one of those women. Now, as founder and CEO of iFundWomen, she wants to help other women avoid following in her footsteps with her crowdfunding platform aimed at female entrepeneurs. We spoke with her at POPSUGAR Play/Ground, where she was a featured panelist.
"I'm kind of a dual citizen," Cahn said. In addition to founding iFundWomen, "I was female entrepreneur who could not get funding after two years of trying to raise venture funding. I wish I had crowdfunded before I invested two years of my life and all my money."
The Bleak Statistics
The data surrounding female-owned businesses is, frankly, depressing. According to Cahn, 1,100 new business are started by women every day in the US alone, and there are around 11 million women-owned businesses in this country. However, women only get about two percent of venture-funding dollars, and women of colour only get 0.2 percent.
Women only get about two percent of venture-funding dollars, and women of colour only get 0.2 percent.
"There is a massive systemic problem in our society today, where women's businesses are not getting funding to get started and get off the ground," Cahn said. "Women are the fastest growing entrepreneurial sector in the US. Yet the revenues of women-owned businesses are only growing at half the rate of male-owned. When women decide to start businesses, our success rate is actually higher because women are more thoughtful and more strategic and more risk averse."
The issue, Cahn said, is that white males control most of the venture capital and therefore tend to fund entrepreneurs who look like them, versus someone who doesn't fit their profile of a successful business owner. That's why iFundWomen has stepped in to fill the void. (The like-minded Female Founders Fund also provides early-stage capital to female-owned startups.)
Cahn cofounded iFundWomen in November 2016 to give early stage female entrepreneurs a platform on which to raise a cash round of funding. The choice to use a crowdfunding model was very deliberate, because it allows women to see if their business idea has legs and if there is a demand for their product before they sink time and money into a venure. After all, said Cahn, "You're not in business until you have customers."
"You should not go into debt starting your startup. You should crowdfund for cash and see if there is a [demand]."
When raising a cash round, funding typically comes from your personal and professional network. iFund helps you raise that cash via free coaching and by offering help with a marketing plan or promotional videos. Unlike other crowdfunding networks, iFundWomen offers a human touch and advice.
iFundWomen supports women and nonbinary people, but not at the expense of men. Multigendered founder teams are welcome and actually tend to do better in terms of sales and profits, according to a study from the Harvard Kennedy School in 2013. In addition, "half of the backers on iFundWomen are men," Cahn said. "There are so many male feminists who have been empowered by our movement."
The Millennial Advantage
Cahn said millennial women are well-positioned to start their own businesses — like, now, due to "giving zero Fs and being young enough to take a risk." Financial advisors will tell you to make riskier investments when you are young, and then get more conservative the closer you get to retirement. The same goes for starting a business. "When you are young and haven't started your family yet, or even if you have a family, you have lots of time to make up for your mistakes," Cahn said.
If you search Google for "how to fund a startup," Cahn said, you'll usually get three standard pieces of advice: max out your credit cards, take out a loan, and chase an equity round. "All of those are horrible ideas for a first-time entrepreneuer," said Cahn, who knows from firsthand experience. "You should not go into debt starting your startup. You should crowdfund for cash and see if there is a [demand]."
Paying It Forward
iFundWomen also reinvests the money it earns from fees into promising businesses on the platform. Like other crowdfunding sites, iFundWomen takes a five percent fee of every transaction on the site. But at the end of the month, they add up those fees and reinvest 20 percent into companies that are overperforming on the platform. Recent startups they backed include L3 Service, a campus locker sharing platform, and The Coven, a coworking space in Minneapolis. An organisation called Ladies Get Paid, which teaches professional development and negotiation skills to women and nonbinary people, used iFundWomen to raise money to cover its legal fees when it was sued by a men's rights group for gender discrimination.
Cahn urges anyone who is thinking of starting a business just to take the first step. In the case of iFundWomen, she said, you can start by emailing firstname.lastname@example.org to get some totally free advice.