Your Next Move - Your Next Move: Female Founders—The Funding Question

Episode Date: March 18, 2025

In 2024, startups with exclusively female founders received just 1.8 percent of all venture capital dollars, a decline from 2023, according to PitchBook. Add a male co-founder and that number shoots up to 21.7 percent. This despite the evidence suggesting that when women do get funded, they deliver higher returns. Is change likely? And if so, what should we expect? At our SXSW Inc. Founders House, Mansueto Ventures CEO and chief content officer Stephanie Mehta sat down with Rebecca Minkoff, founder and chief creative officer, of Rebecca Minkoff, and Ali Wyatt, co-founder and CEO, of Female Founder Collective and The NORTH, to discuss the state of funding and the challenges facing female founders.

With the Venture X Business Card from Capital One, you earn unlimited double miles on every purchase. Plus, the Venture X Business Card has no preset spending limit, so your purchasing power can adapt to meet your business needs. Capital One, what's in your wallet? I'm Sarah Lynch, and you are listening to Your Next Move, audio edition, produced by Inc. and Capital One Business. In this episode, you'll hear from Ansuado Ventures CEO and Chief Content Officer Stephanie Mehta, as she chats with Rebecca Minkoff, founder and chief creative officer of Rebecca Minkoff, and Allie Wyatt, co-founder and CEO of Female Founder Collective and The North. They sat down at this year's South by Southwest of Female Founder Collective and The North. They sat down

at this year's South by Southwest Inc. Founder's House to discuss the state of funding for female-founded startups. Stephanie kicked off the conversation by asking Rebecca why it's so hard for women to raise venture capital. There's a long answer to this question but to keep my answer as short and as informational as possible, there are a lot of women-owned businesses that are starting consumer-based businesses that are not even right for venture to begin with. But I think we see it all talked about, it's on the headlines of magazines and newspapers, and then every woman says I need venture in order to have a

successful business. You don't. There are alternative forms of capital. It's not talked about enough. Bonnie and I were sharing, and I'm excited that you guys to have a successful business. You don't. There are alternative forms of capital. It's not talked about enough. Bonnie and I were sharing, and I'm excited that you guys are going to be focusing on what alternative forms of capital can be for women. And then I would say that you have to make sure that you have the type of growth, high growth business for VC that they want to invest in. You got to expand your list much bigger than you ever thought. I'm in the process now, and I'm talking to more people than I ever thought I'd have to. But I'm reminding myself it's a numbers game.

And I think that one of the things we focus on at Female Founder Collective is educating women about alternative forms of capital. And then if they are going to go after VC, what you need to know in order to succeed. And so it's one of the things that we talk about a lot about women so that we can at least give you a little bit of a leg up knowing the numbers are so dismal. And we're gonna get to some of those alternative forms of funding in just a minute. Allie, what are you hearing at Female Founders Collective?

What are the female founders that you interact with every day telling you about the challenges they're facing around funding? I think it really does have to do a lot with what Rebecca was saying. In some cases, women are barking up the wrong trees. They are going to funds that don't invest in their particular industry and then they're not hearing back from them. I think networking is happening in real time, which it needs to happen long before you're going out to start to raise funds.

So something we encourage women to do is to get to know different investors, VCs, and the best way possible go to those networking events. It is very difficult to lift your head out of your business. Or maybe when you know an idea is percolating and you're thinking about starting a business, start to go into the industry that you're thinking about starting a business, start to go into the industry that you're thinking about starting the business in and get your name out there. Have coffees, have drinks,

you know, be in the rooms at those events and introduce yourself because those are the relationships that you need to start cultivating very early on. And then the other thing that I would say is that a big piece of what we see with the founders inside of Female Founder founder collective, we do these pitch events where they get to practice pitching in the confidence level, which is it tends to be one of the biggest ingredients is not there in the same way as you might see with their male counterparts where they're almost apologetic for building a business that they have every right to be building and they have all of the career accolades to be building. So have a lot of confidence in what you're building and reframe the way

you're thinking about raising money and that this is something that you're going to bring investors in on your journey and they're lucky to be a part of the giant business that you're building. I love the tough love. Rebecca, you are an investor. Tell us a little bit about what you look for as an investor and maybe share a bit about how you structure things because as you said, not every business necessarily is going to grow 10x. And so what are the kinds of businesses you're looking for? And perhaps if it's not a traditional venture-backed business, what are some of the ways that you are able to support those businesses without necessarily a formal cap table?

So the businesses that I typically will invest in is one where I know the founder is going to stand the test of time and be able to stomach the challenges she's going to face ahead. Because let's face it, as a founder, a man or woman, it is hard. And there are things you never prepare to have happen to you again and again and again. I need to know that that person's going to get back up and is going to be innovative or pivot. I think I recently received an update from a founder who's changed her business four times now, but I'm like, it's okay, girl. I'm still rooting for you because you're pivoting to what's going

to eventually work. I think I also now only will invest in businesses that I know I have the bandwidth to amplify and support. For instance, there's a company called BioMe. It's a gut health supplement. And I'm an advisor as well, because I want to make sure that my investment actually pays off with social amplification, press introductions. So if I have the bandwidth to take it on, that's what I'm doing, because I think these up and coming brands, as you know, need all the help they can get. So if I have the bandwidth to take it on, that's what I'm doing because I think these up and coming brands as you know, need all the help they can get. So I'm gonna be strong, I'm gonna keep getting up

and then can I do something to support and amplify. Ali, you recently spoke with my colleague, Ali Donaldson for an article in Inc. And you talked about how the last few years have been especially tough for female founders because there has been a cooling of interest in consumer startups, but you also said there's an opportunity to make a virtue of this, to use this moment to your advantage. Can you expand on that for our audience?

I think it's about going back to the basics of building a profitable business. Imagine that. I think for so long, it's been growth for growth sake, and we're getting back to the fundamentals of creating a forecast and making sure that your budget is going to be something that makes you money, and really sort of looking at the economics of your business to make sure that it works

before you're jumping into starting a product that you might love, but maybe the math doesn't work out. So I think female founders have notably been better off in these downturn times because they've always had to be. They don't have the free access to capital or cash that maybe some of their male counterparts have, but we're building better businesses now and using better fundamentals. And if I could just tack on, when we bootstrapped for the first seven years of Rebecca Minkoff,

by the time we got our first investment, it was grow at all costs. And then when we were ready to sell, it was like, well, are you profitable? The answer was no, we were not. And that wasn't an easy thing to turn around. And so I think to Ali's point, make your business profitable. Will you grow slower? Yes, that is okay.

That's how business used to be done until we all got drunk on the venture capital Kool-Aid. And so I think we need to get off the drug and hit a reset button with reality and like there's nothing wrong with a profitable, sustainably growing company that provides a great lifestyle for you and your employees. That's something to be incredibly proud of.

And so just to reorient your thinking and plans for that. Rebecca, can you talk a little bit about what advice you would give a founder who may find themselves in a situation where they have taken venture dollars? I think that venture pulled a little bit of a bait and switch with direct to consumer companies in particular, but consumer packaged goods for years and years and years. It was, as you said, grow at all costs, customer acquisition, build up your customer base,

figure it out later. And then when the funding environment dried up, all of a sudden it was, well, where are the profits? For founders that have taken venture capital, how do they push back when perhaps the venture investor is pushing them to do something that isn't in their value set or in their core interests? And I want to talk a little bit later about what the alternatives to venture are. But if you are in a situation where you and your board or your investors have a difference of opinion about that profitability path, how does the founder work their way into that? I think before you sign the agreement, you make sure that the rights you have are able to veto some of that advice.

When we signed our private equity deal, we still had a lot of control. And had we listened to our first private equity partner, we wouldn't be here. So we could push back. I think if you're in a scenario where you don't have that control, it's incredibly hard. And I think it's sort of, again, educating the people you're sitting at the table with,

let's grow this profitably. It'll be better for everyone in the long run. Here's the long-term vision. Here are the statistics and the data to prove it. And you're selling them again. It's like starting over with a new partner and getting them to switch their mindset up. Yeah, I would just sort of understand the metrics of success that the investors that you're partnering with have before getting into business with them.

It's so important. I think oftentimes we're so excited to get that capital in the door and sign that term sheet that you're not actually looking at the terms to see if they are friendly for the long-term direction of the business. And then the tail ends up wagging the dog when in terms of investors they have a certain direction they want you to take in the business and I've actually been in this scenario multiple times in the past where you know it's not the right direction for the business but you end up wanting to sort of pander to your investors. I think that

investors on the other hand are looking for founders that can be strong enough to take that vision and also know what's going to be best for the business in the long term and Your investors want you to continue to grow and not go out of business So that's the other piece I would tell them that the direction That they're pushing you into is actually going to put you out of business, if it is. And that's where that confidence comes in again, knowing your business and then having the fortitude to push back. Rebecca, you talked about bootstrapping. Kate Luzio is in the audience, who is one of the premier folks of championing bootstrapping. I imagine a lot of people here in the audience are bootstrapping their businesses.

It's hard to do it for seven years. Share with folks a little bit about how you were able to continue to self-fund your business even as you were trying to scale. So in the very beginning, luckily enough, my brother, my co-founder at Rebecca Minkoff had good credit, so we used his Amex. That was the first tranche of funding. When that got capped out, he mortgaged his house, which some people won't want to do, but he could see the numbers and how much explosive growth was happening. And so it was a risk he was willing to take.

Finally, when we reached a certain threshold of revenue, I think it was around a million dollars, we got purchase order financing. There's a bank in New York called Rosenthal and Rosenthal or Hilden that is specific to fashion, but they've sort of gone out of that arena now and are investing in food companies, not investing traditionally, but loaning. You get a purchase order, they give you an advance, then they collect the money, which is really nice. They can also do credit checks on these brands. Don't ship to a blank department store because they haven't paid 10 of our other vendors.

So we wouldn't advance you the capital for that. So that was a really great bridge for us, but it was very hard. Every decision around hiring someone, can we afford it? My brother didn't take a salary for the first five years. I was paid an embarrassing amount of money for the first seven years because everything was going back to build this business,

but it paid off. After seven years, we did get private equity partners. And like Allie said, be careful. Just because one person says yes to you doesn't mean they're the right partner. You are more married to these people than any spouse you'll ever get married to. And that document is wild how complicated it is. So make sure that you just don't jump at the chance and that you're really deciding that you're with the right people who have the right vision and outcome that you have.

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to meet your business needs. The Venture X Business Card also includes access to over a thousand airport lounges. Just imagine where the Venture X business card from Capital One can take your business. Capital One. What's in your wallet? Terms and conditions apply. Find out more at CapitalOne.com slash Venture X business. Do you recall how many private equity partners you interviewed before taking on the partner you chose? So, at that time, that was when the handbag space was really hot and growing and explosive

in 2012. So, we probably spoke to about five people, but now that batting average is probably 20 to 30 people is probably more realistic. And what were the red flags for you for the investors you did not partner with? Well the red flag that we should have had with the investor we did go with was drag rights. So you sign a document and it says, you know, in seven years they have the right to sell the whole thing if we don't find someone first.

And you're like, seven years? Don't worry about it. That's forever. Well, seven years comes up real quick. And then when you're sitting at the table and you're not agreeing who they would like to sell your entire company to, it can get quite intense. Ali, talk a little bit about the role of friends and family, particularly for a lot of the founders and the the female founders collective who are probably far

from being ready for seed. What do you see as the role of friends and family? And again, how do you structure those things so that Thanksgiving dinner doesn't get too testy? Well, so oftentimes I feel like friends and family is not actually friends and family, right? I would say that I'm seeing a lot of this happen. I actually think it's a really smart way of funding your business because they're not gonna have

the same expectations as institutional investors. But if you structure what's called an SPV or a special purpose vehicle or a syndicate, you can have somebody lead that that is passionate about your business. And so you might ask yourself, okay, who might that person be? I would have it be somebody you know and trust, don't go out to just anybody, but really it could be somebody you used to work with who believes in you and knows the value of your leadership and ability to build a business. It could be an advisor that you are bringing on

to the business that has a lot of contacts within your specific industry. But what happens is, is you can actually get a number of different investors at a much smaller level. So it really breaks the barrier of, you know, the maybe $25,000 checks that you might be otherwise requiring somebody to get you to a half a million dollar seed or a $250,000 seed, it breaks that benchmark which is very difficult for a lot of people to invest that much and it actually breaks it down to be smaller and then the SPV lead or the syndicate lead is the one that's responsible for that pool of people and

you as the founder are not talking to the hundred investors all at a thousand dollars of investment, instead your syndicate lead is responsible for that and they'll get additional equity usually into your company or a management fee of sorts for doing that. So I've seen that as a really great way to go out initially in the early stages of your business when you're trying to get to proof of concept or to that early benchmark that's going to get you to where you can go and get factoring in purchase order financing.

Rebecca, do you have a point of view on small check writers and what impact does that have when a more sophisticated investor like yourself gets involved in a company if someone has been collecting small checks up until the point that they're ready to go out and get a professional investor? How does that affect the cap table? Is that something you look on positively as an investor?

I look at it very positively because you can see that they already have a community and a fan base of people who've bought into the idea. If I'm looking at a company and there's a couple SBBs or syndicates with 10, 15, 20 women, I'm like, those are your first customers. I hope you're surveying them on the product. I hope you're taking them along the ride for the journey. And I think it's incredibly helpful to know

that there are that many people behind someone. And interestingly, going to your customers as investors or not just for seed, Fast Company and Inc. recently wrote about Sarah Lafleur, who's the founder of M.M. Lafleur. She was having a money crunch due to an issue with her bank, and she went out to her customers and a couple of investors, and her company is large and established, but they basically came to her rescue. So it is important to maintain those great relationships with your customers.

You just never know when you're going to call on them. Let's talk a little bit more about issues that female founders uniquely face in this environment. We talked a little bit about how grit is sort of a superpower for a lot of female founders, but it is stunning to me that in 2025, we still see so much bias in the fundraising process and in the business building business. Ali, what advice are you giving to women at Females Founders Collective who come to you

and feel like they continue to see barriers put up because of their gender? I think that at the end of the day, we have to find a common language. If, again, if gender is part of the issue, then you're going to the table with a vocabulary that investors speak. I oftentimes find that we're not speaking the same language

and that's a part of the problem. And so what language do they speak? Make sure you are coming in knowing your data and the growth potential behind your business in a really rock solid way, because I think oftentimes when I get into these pitch conversations with the founders, I'll see that they are a little unsure

of where their business could be in five years, or they might be unsure of how big the market size is for their business, or what is the root of their problem. And at the end of the day, it's math. And so if an investor is seeing this amazing economic opportunity for themselves, it doesn't matter if you are man or woman, you are a founder that's gonna build a great business. And then that's where that confidence piece comes in.

Again, too, is that I will often find when you ask them, why is it that you're the person that's going to be leading this business? They're like, well, you know, I'm really passionate about the product. That's not being passionate is an absolute essential ingredient for building your business. But at the end of the day, for an investor, that is not the biggest thing for them. They want to know that you are the best person to be piloting this airplane, right? If you think about, I always use this analogy because it was actually given to me by a

psychologist that's all about parenting. But they say, if you are on an airplane and it's super turbulent and the pilot gets on and he's saying, or she is saying, all right, guys, it's really rough out there. I'm going to try to get ahold of this airplane I think I can do it and just please sit tight because I don't want this plane to get too rowdy right like how are you gonna feel as a passenger on that airplane it's terrifying on the other hand if you get a pilot and he gets on and she gets on and she says all right guys it's a little bit of rough air out there in about five to 10 minutes, it should smooth out.

We're going to have a great ride and enjoy, enjoy the flight. And you're going to feel a lot more comfortable. It's the same sort of notion as you're presenting to investors because at the end of the day, you're their leader. You're the person that they're putting the money behind. So you really have to have that confidence that you are the right person to be doing this. I would also add to it. I think we've done ourselves a disservice by saying if you're primarily pitching a feminine based brand to mostly men to say well, they should understand.

Well, if someone's pitching me on fantasy football, you better believe I'm gonna go ask my husband or my son what they think about the product. So I think it's important if you are pitching that is something that is a use case that only we know and can experience, that you ask for these investors to bring their mother, their wife, their girlfriend, their sister into the room, because that woman will understand and will be able to share insights with someone that they're familiar with. So don't shy away from admitting, like, this is a product for a woman, here's why. Bring someone that understands this,

if it's all going to be men, or bring other stakeholders, or other managing partners that are women into the room, can only help us instead of saying, no, you should just get it, because it's a good idea, and because I have product market fit. Front run it. Which leads me to my final question around getting more women on the cap table, more women as investors. This isn't a panel about venture

capital, so I don't want to talk about the need for more women in VC, but there are a lot of very high net worth women who would much rather stroke a check to a charity than write a check to a female founder. How do we get high net worth women, and I think there are probably a few in the room, you've exited a business or you're on a trajectory of success. How do we get more women to invest in women? That's one of the reasons why we started Female Founder Collective. You might say, okay, well, that's on the founder side, but the intention is that more females will exit their business.

They'll create generational wealth, and then ultimately they'll take that wealth and they'll know that they can pour it back into the system. And we're already seeing that happen a lot already, which is super exciting. But I would also say there are educational groups also popping up. I'm part of one of them where it teaches you how to invest. I think a lot of times

women don't invest. They would rather write those charity checks because there isn't an expectation of return on investment for those. So how do you learn about what to expect, how to do diligent? And I would say if you haven't heard of these groups, they are definitely out there, so keep digging. But also talk to your other, your friends that have started businesses or even those you know, any of them that have exited and it can be man or woman, talk to them about how do they think about the investment and maybe ask them if you can shadow their diligence process or the pitch process with a couple of founders so that you can start to understand what to look for and how to find a good investment. I want to thank Rebecca and Ali for this tremendous session. I want to remind everybody that if you have an opportunity to please go inside the

Capital One business space and take a short one-minute survey and you will receive a free gift while the supplies last. But please do that throughout your time here at the Founder's House. Meanwhile, we do have another session right here at 11 o'clock. Thank you so much for joining us and once again, thank you, Ali and Rebecca. Thank you. Thank you. That's all for this episode of Your Next Move.

Our producers are Blake Odom and Avery Miles. Editing and sound design by Nick Torres. Executive producer is Josh Christensen. If you haven't already, subscribe to Your Next Move on Apple podcasts, Spotify, or wherever you listen. Your Next Move is a production of Inc. and Capital One business.