According to successful entrepreneurs who shared their experiences at the Dynamic Women in Business Conference 2004, the right amount of investment at the right time can make the difference between a start-up soaring or crashing. At the same time, entrepreneurs need to understand that cash comes with a price, agreed panelists at the Entrepreneurship session held January 24, 2004.
"Venture capital is rocket fuel, but you really do sell your soul to the devil in some ways," said Diane Hessan (HBS MBA '77), president and CEO of Communispace Corporation. Her company, which is backed by venture capital, produces software that enables companies to conduct ongoing focus groups with hundreds of customers online. Hessan was quick to add, "I've never had anyone say to me 'If you don't do this, I'm pulling the money,'" but she and the other panelists said it's important to manage investors' expectations.
Linda Kanner (HBS MBA '75) is chief executive officer of Insolia, a company that holds a patent on a method of making high-heeled shoes that feel like flats. Kanner's twenty-five-year career has included senior positions in large, multi-divisional companies followed by six years in venture-funded startups. Striking the right balance between optimism and realism, she said, is an important challenge for entrepreneurs to overcome.
"We're hopelessly optimistic," she said. After all, "You have to believe in your product in such a way that people believe you." Kanner said it is critical that an entrepreneur ask for enough money to get to a milestone that an investor will recognize. If the money runs out too soon and the milestone is missed, more funds are unlikely to follow.
Stephanie Khurana (HBS MBA '76), director, co-founder and former CEO of Surebridge, a company that supplies outsourced business applications, said it's important for an entrepreneur to have some sort of exit strategy in place before soliciting outside investors. "You need to produce results very quickly" once investors have come on board, she said.
In the current environment, however, raising equity can be extremely tough. Allison Devore, manager of the Center for Women & Enterprise in Boston, said few early-stage companies are getting capital now, and the newer companies that are able to attract funds are typically founded by individuals who are already tops in their field. "It's really people who are leaders in their industry right now, and that may take five or ten years," Devore said.
With the spigot relatively dry on venture capital, the women said raising as much as possible from family and friends is one way to get seed money. Attending events that connect potential angel investors with entrepreneurs is another. Asked what types of businesses are most attractive to early-stage investors now, Hessan said, "Think tech-enabled, not 'what software thing would be cool.'"
Khurana, who now sits on the board of Axxon Capital, said medical devices, bioinformatics, and companies that provide all types of outsourcing services are drawing interest. 