Investing In Change: Inside X-Factor’s Female-Forward Strategy

Investing In Change:

Inside X-Factor’s Female-Forward Strategy

Photo Courtesy of qualigence

The investment and startup worlds are dominated by men. A whopping 80 percent of companies that receive VC have male-only founding teams. Of all VC funding last year, women received only 2 percent. Inevitably, these statistics have kickstarted a movement in order to eradicate these barriers to entry for female founders. Enter XFactor Ventures, a unique fund that makes it their goal to focus on female entrepreneurs. Last year venture capitalists invested $58.2B in companies with all-male founders, while women received just $1.46B, and only seven percent of partners at most VC firms are women. Inspired by the percentages and the desire to change the stats, the business runs on the belief that, “we as an industry can do better than this.”

What’s perhaps most unique about the fund is that its investment team comprises of successful female founders. They manage the fund, providing capital, connections, guidance and mentorship to the companies in which the it invests. The company is based on twin beliefs that female founders are an underserved community and that diverse founding teams will outperform their peers in the market. Unlike other scout programs, where investors have the ability to make an investment without input from anyone, when an XFactor investment team member sources a deal, she will share with the full team and to get input. To date they have invested $800K into eight companies.

We spoke with seven of the XFactor investment partners about their experience in VC culture and they shared with us some nuggets of advice for future founders pitching their businesses.

Jessica Mah, InDinero
Tell us briefly about your company, what inspired it and point of difference?

InDinero does accounting and back-office operations for small and mid-sized businesses. We want to transform the accounting industry by providing more automation in a field that has seen little innovation over the past decade! I was inspired because my last business needed accounting help and I wished there was a software+service company that could take the problem off my hands and also grow with my business as we grew. I hated the idea of having to use clunky software like QuickBooks and hire a traditional accountant. With inDinero, customers get modern and entrepreneur-friendly software to see how their business is doing in real-time, and they also get a finance team to run their accounting for them.

What frustrates you about VC culture as it is today?

They’re slow to make any decisions on who to fund and like to wait for other people to come in first. Once there’s competition, they’re all over you! And until then, they can’t make an investment decision!

What is one piece of advice you would give to female founders who are pitching investors?

Run diligence on them just as much as they are diligencing you. Ask them how they provide value to entrepreneurs, what’s their advice on how you should think through the business, and who else can they introduce you to?

Jessica Mah. Photo courtesy of Forbes
Liz Whitman, Manicube
Tell us briefly about your company, what inspired it and point of difference?

 I started Manicube to make working women’s lives easier– to bring confidence and color into their workdays at the office.

What is one piece of advice you would give to female founders who are pitching investors?

Not being direct with entrepreneurs. Honest feedback is the best way to learn!

What is one piece of advice you would give to female founders who are pitching investors?

Run at what scares you most about your own business and do it early; people who go to work because they are passionate about what they’re doing will stay with you forever; identify the crystal balls and don’t drop them.

Nicole Sanchez
Nicole Sanchez, Credit Hero
Tell us briefly about your company, what inspired it and point of difference?

 Credit Hero is the first system designed to help consumers improve their credit scores. We started it because we’re familiar with the problem and saw a massive gap in the market. There are many tools to help you get your credit score but nothing to solve that pain point, so we created it.

What frustrates you about VC culture as it is today?

My biggest frustration about VC culture today is groupthink. On one hand, tech is highly collaborative and VCs share deals. That’s the fantastic nature of this industry. The more backers the companies you fund have, the higher the likelihood of success for your investments, so it behooves the ecosystem to collaborate. Unfortunately, though, I still see limited original thinking and risk-taking. VC’s ask founders to paint a bold vision and yet when it comes to funding often filter for problems that they themselves face. When VC’s are not representative of the majority of consumers, this habit of groupthink is expensive ($118M in funding for $400 juicers comes to mind) and limits the breadth of what gets funded missing large opportunities. At X Factor I love that we’re willing to make bold, big bets.

What is one piece of advice you would give to female founders who are pitching investors?

Be bold, big, and courageous.

Create and articulate a bold and big vision. The best founders see a world that does not yet exist, so own and advocate for your vision.

Surround yourself with the best possible people, build a community of other founders who will have your back and get help when you need it. Be self-aware and build in opportunities to take stock.

Fearlessness is a myth, but courage is where you’ll win.

You got this.

Erica Brescia, Bitnami
 Tell us briefly about your company, what inspired it and point of difference?

Bitnami is the leading provider of packaged applications for any platform. The Bitnami application automation platform delivers and maintains a catalog of ready-to-run server applications and development environments in partnership with the world’s leading cloud providers such as Amazon, Google, Microsoft, Oracle and more . That same application automation platform that drives over 1 million deployments per month is also available to Enterprise developers looking to streamline their software development processes. Based in San Francisco CA, and with offices around the world, Bitnami is proud to be a rapidly growing self-funded company.

What inspired Bitnami was seeing first-hand how “software is eating the world.” Packaging and configuration of server software may not sound exciting to many, but it is a crucial piece of getting the applications that we all interact with on a daily basis up and running, and in keeping them secured. Bitnami enables millions of users around the world to deploy their software on virtually any platform they’re running in an efficient, consistent way that also makes it easier to migrate between platforms as their needs evolve.

What frustrates you about VC culture as it is today?

A lack of alignment. There are so many mega-funds that have so much capital that they need to put to work that companies sometimes end up taking too much cash at sky-high valuations. This puts them in a tough spot if they don’t exceed all of their milestones, potentially resulting in down-rounds that are extremely dilutive to founders and employees. I like the trend I’m seeing of smaller funds, making fewer bets, that are focused on capital efficiency and sound business models

What is one piece of advice you would give to female founders who are pitching investors?

Startups require more tenacity and perseverance than anyone who hasn’t founded one would know. Be prepared for it to take longer than you think to do just about everything – from fundraising to launch to scaling.

Aubrie Pagano, Bow & Drape
What is one piece of advice you would give to female founders who are pitching investors?

Plan for everything to cost 1.5x and take 1.5x as long. Focus your efforts on building the absolute best team (including investors) possible because they will make the difference in execution — you can’t do it alone.

Aubrie Pagano
Anna Palmer, Wondermile
What is one piece of advice you would give to female founders who are pitching investors?

Be confident and pitch your big vision. Don’t be scared to be bold. If you think your company can be a billion dollar company go in and convince people why.

Ooshma Garg, Gobble
What is one piece of advice you would give to female founders who are pitching investors?

I believe breakout founders have a GEM DNA made of grit, experimentation, and mission. The most important advice is to have a grit at your core and never give up.

Contrary to popular belief, breakout companies take years to build and almost die numerous times. It’s important to weather the storms and maintain your composure in the ups and the downs of your journey. Constant experimentation is a must! Netflix evolved its service time and time again to both find and keep product/market fit. As the world changes, your stellar product may need to change with it. In my experience, founders who continue to visit and listen to their customers regularly, no matter how big their company grows, are the most successful. Lastly, when people are coming and going, the product is changing, and the world around you is changing, a core mission will be your north star. To build a long-term company, not just a current product, is rooted in a mission that unifies your team.

If you can keep going, always be adaptable and listen to your customers, and develop a culture and approach around a singular mission, I believe you’ll be successful.

Ooshma Garg. Photo courtesy of Startup Festival
Amanda Jaguden

Amanda is a writer living in New York City. She loves reading, coffee, traveling and anything that empowers women.

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