Bringing a promising business idea to fruition involves numerous resources. In addition to targeted business or technological expertise, the passion-driven business owner brings collaborative skills and an innate ability to keep many balls in the air. Collectively, these attributes are key to transforming a great idea into a viable product or service.
Without sufficient startup and development capital, however, the business will never get off the ground. That’s where angel/early-stage investors often step in, providing much-needed funding to bring the new company into the marketplace. In return, the investor receives a stated percentage of equity in the business.
Aiming for a Level Playing Field
Not surprisingly, there is fierce competition for available financial resources. Steph Korey, a successful entrepreneur, and angel/early-stage investor, strongly advocates a level playing field where every founder has an equal opportunity.
Ideally, each dedicated entrepreneur will receive the financial support needed to move their business forward. New companies often require investment capital for equipment, product development, marketing programs, and support systems.
Underrepresented Entrepreneurs Often Lack Crucial Funding
For perspective, Steph Korey points out that many talented entrepreneurs are women. Capable business owners also come from every ethnic group and cultural background. She strongly believes that these entrepreneurs collectively represent some of the most promising investment opportunities.
However, Korey says women and minorities do not always receive serious consideration from start-up funding sources. To illustrate, female founders receive just 2% of early-stage funding even though women represent over half of college graduates.
In fact, PitchBook and All Raise presented data showing that women founders’ total venture capital percentage has barely budged for the past decade. Despite a healthy number of new startups annually, women founders have only received about 2.5% of the available funds. This lack of access to financial resources often hampers the business’ growth and can potentially cause its early demise.
The Abundance of Diverse Founders
A significant number of women and minorities continue to launch viable businesses, notes Brittany Davis, Backstage Capital’s Director of Deal Flow. This successful venture capital firm is known for investing in companies run by women, people of color, and LGBT business owners.
To date, Backstage Capital has made investments in 100 companies and has debuted a business accelerator. The firm also launched the “It’s About Damn Time” Fund. This $36 million seed investment vehicle provides critical support to underrepresented founders. According to Backstage Capital, many venture capital firms initially passed over these businesses.
Brittany Davis readily gets to the heart of the problem. “So, the founders are out there, but most VCs just are not looking. And even when funds do encounter more diverse founders, they often don’t see the opportunity because either the founder or their business doesn’t fit into their box of what they predict will be successful,” she concludes.
What’s Behind the Male-Female Funding Gap
Three factors play a key role in the significant early-stage funding gap between male and female founders. In 2017, researchers at TechCrunch Disrupt New York objectively observed meetings between entrepreneurs and venture capitalists.
For perspective, all the start-ups were essentially comparable in scope. However, the male-led businesses obtained five times as much funding as new women-led companies.
Two Different Types of Questions
The sessions’ video transcriptions showed that venture capitalists of both sexes presented male and female entrepreneurs with entirely different sets of questions.
To illustrate, men were generally asked promotional questions regarding their goals and professional advancement potential. However, women received questions about due diligence and safety risks.
Harvard Business Review shared an important insight on the questions’ connection to the capital disbursed. When comparing very similar businesses, the researchers found that entrepreneurs presented with mainly promotion-focused questions (the men) raised seven times more capital in 2017.
Separate Perceptions of Non-tech Skills
A Crunchbase study found a difference between male and female entrepreneurs who possess non-technical backgrounds. The non-technical men were assumed to have more leadership skills than men with technical experience.
However, when female entrepreneurs were the subject of the question, the outcome was substantially different. Women without technical backgrounds were regarded as having fewer leadership skills than technically skilled women. In addition, the non-technical women were viewed as less competent overall compared to women with technical backgrounds.
Significantly Fewer Female Venture Capitalists
The venture capital firms’ makeup plays a key role in the awarding of investment dollars. For perspective, under 10% of venture capitalist firms’ decision-makers are women. In fact, 74% of United States venture capital businesses have no female investors at all.
In these male-centric investment settings, male investors speak about male and female founders differently when reviewing investments. In some cases, female entrepreneurs are criticized for displaying typically feminine behaviors.
On a more positive note, venture capital firms with a diverse makeup are more receptive to pitches from underrepresented founders. Studies have shown that when a venture capital firm includes women and other minorities, these companies tend to invest more frequently with diverse business owners.
Fewer Women in the “Unicorn” Ranks
A pronounced gender gap also exists when looking at the makeup of “unicorn” companies. In the venture capital industry, a unicorn is a privately held business start-up with a $1 billion or higher valuation.
Market research firm Statista notes that between 2013 and 2021, the number of female-led unicorn start-ups fluctuated considerably. During the first quarter of 2021, for example, six female-led United States start-ups achieved unicorn status. In 2020, 10 female-led unicorns were reported, five fewer than in 2019.
For perspective, these more recent results were somewhat more encouraging than the 2018 unicorn numbers. In May 2018, the United States market boasted 130 venture capital-supported unicorns. However, only 14 of these unicorns were led by a female co-founder.
Steph Korey Expresses Optimism for the Future
Entrepreneur and investor Steph Korey has personal experience in the rarified unicorn arena. She co-founded the lifestyle brand Away, which became a unicorn in May 2019 with a new round of investments.
Korey is hopeful that more women will join the unicorn cohort over time. In fact, she would like this trend to be regarded as business as usual. “My hope is it’s a step on the journey to be at a place, hopefully in the not-too-distant future where it’s so common that billion-dollar companies are female-founded. We get to a point where half of them are, and it’s not even noteworthy anymore,” she concludes.
How Steph Korey is Changing the Playing Field
As a successful entrepreneur and investor, Steph Korey is well-positioned to provide investment capital to start-up and early-stage businesses. She is especially interested in working with women and other underrepresented entrepreneurs who may be passed over during the funding selection process.
To date, this angel/early-stage investor has engaged with eight start-up and emerging businesses. Besides her financial support, Korey provides ongoing mentorship to each company’s founder. Her foundational belief that talent and opportunity should be equal drives her commitment to these founders.
About Steph Korey
Each individual’s worldview is shaped by their upbringing. For Steph Korey, her Romanian mother and Lebanese father together provided her with a rich multicultural childhood. Through visits to her overseas relatives, Korey cultivated an appreciation for European and Middle Eastern cultures.
“Exposure to different cultures has always been a part of my life. I’m lucky to have had the opportunity to travel so much with my family growing up, and it’s shaped a lot of my perspectives and how I see the world,” Korey says.
College and Career Progression
Steph Korey’s exposure to multiple cultures likely influenced her choice of college majors. Attending Brown University, she earned a Bachelor of Arts in International Relations. After her college education, she briefly worked in a conflict resolution role at the Carter Center in Atlanta.
Deciding that a private-sector job would better suit her professional goals, Steph Korey accepted a position as Head of Supply Chain at Warby Parker. During her tenure at this fast-growing eCommerce eyeglasses retailer, she led the company’s product development, production, and distribution functions. In addition to becoming a direct-to-consumer (or DTC) brand expert, she learned how to build a supply chain from scratch.
Steph Korey’s Warby Parker achievements motivated her to obtain an MBA. During her studies at Columbia Business School, she executed merchandise strategy functions for Casper. While working at this rapidly expanding DTC mattress seller, Korey further honed her supply chain and merchandise management skills.
Effective Storytelling is a Key Component
Finally, Korey identified another important piece of the entrepreneurial puzzle. She realized that powerful storytelling is key to attracting an audience’s attention and spurring them into action.
“My experiences at Warby and Casper also proved that a brand’s success is determined by so much more than just a great product. People don’t get excited about eyeglasses or mattresses—they get excited about the story those brands are telling,” she emphasizes.
In 2015, Steph Korey co-founded Away, an expanding global lifestyle company. Under her purview, the business raised $156M and eventually achieved a $1.4B valuation. Twice during her tenure, Fast Company voted the firm one of its Most Innovative Companies.
Focusing on Underrepresented Entrepreneurs’ Success
Today, Steph Korey has come full circle as an entrepreneur. First, she gained valuable supply chain, business management, and marketing skills. Next, she utilized those skills to co-found a highly successful company that continues to expand its product line.
Now, she works with women and other underrepresented entrepreneurs. She provides them with the financial resources and mentorship that will help them to gain a foothold in the marketplace. This ever-evolving process enables Korey to identify emerging opportunities that will enable her own professional growth.