Founders want more than a check from their investors

Venture capital isn’t only for Silicon Valley.

But founders around the country may think that as they navigate a venture capital market that remains difficult to break into, especially for founders who don’t come from a stereotypical background. A 2019 Harvard Kennedy School study showed that women-founded companies received just 2.4% of venture capital funding on average over the past 30 years.

VCs and startup hubs outside of traditional locales are attempting to bridge that divide and connect funding opportunities with local entrepreneurs.

In August, Founder Brew visited Atlanta Tech Village for its Women & Tech meetup hosted by two Georgia-based venture capitalists. While there, we spoke with founders and investors about unexpected fundraising challenges, what founders should seek out when choosing an investor, and how businesses of all sizes can benefit from backing.

Founders facing the fundraising challenge

Some event attendees saw positive movement specifically for ‌female founders looking for business backing.

“The landscape for women getting funded for their ideas is a lot better,” said Candice Bazemore, founder of Profit Scholars, a platform that helps entrepreneurs scale their businesses.

In Bazemore’s view, that improvement is due to the growth of women influencing household purchasing decisions, giving investors more reason to seek founders who understand women consumers.

But other female founders attending the event reported challenges with connecting to investors who they feel understand their businesses.

Tarzine Jackson spent 18 years in tech, eight of them as a senior software engineer.

So when she started talking to investors about her new startup, Koalesce Designs, she was prepared to answer questions about her business. Instead, investors had a different question.

“They asked me, ‘Where’s your co-founder, and who’s your technical person?’” Jackson said.

Jackson had worked at Microsoft, spent a decade with Women Who Code, and built the technology behind Koalesce herself.

For Jackson, the fundraising process has been challenging in part because she believes investors misunderstand her business from the start.

“They think it’s one thing when it’s another,” she said.

Jackson isn’t the only founder who feels investors don’t always see the opportunity.

For Desirée Anyasodo, founder of Atlanta-based marketing and communications firm, Amaka Communications and Consulting, the disconnect comes from how investors view professional services businesses.

“When you’re in professional services, people don’t think you need capital because you’re not selling a product; you’re selling a service,” Anyasodo said.

She hopes investors realize the opportunity in funding businesses that often get overlooked.

“At times people just tend to gloss over our smaller business clients,” she said. “Small businesses are the engine of any economy, especially in a capitalist society, and so fundraising is equally as important, if not more important, for small businesses than large businesses.”

Room for growth

Investors at the event saw more founders explore options beyond traditional venture capital.

“We’re definitely seeing founders pursue alternative financing options, largely because it’s hard to raise capital these days,” said event host Akshita Iyer, corporate insights lead at Engage Ventures, an early-stage investment fund based in Atlanta. She said the bar for larger rounds has risen as investors look for more traction to justify higher valuations.

Iyer’s firm encourages founders to bootstrap or pursue alternative financing until they reach milestones that make venture capital a better fit.

“You also retain more of your business, so we’re huge fans of looking elsewhere,” she said.

Her cohost Maddie Harper, a senior manager of programs at Engage Ventures, pointed to another challenge for Atlanta’s startup ecosystem: keeping successful founders in the city after they exit.

“There is not a lot of community building aspect of founders that have done a great job, have exited, have generational wealth, and then are giving back to the community,” Harper said.

Finding the fit

Jackson, of Koalesce Designs, is taking a more selective approach to finding her next investor. She wants to “date” potential VCs, looking for alignment on their values and what they can bring to the company beyond capital.

Harper agrees that founders should look for investors that offer more than just a financial interest in their business.

“Finding those right people, right partners in order to give you advice and think through how do you build a company that’s fit for you as a person is so important,” she said.