For Caroline Lewis of Rogue Venture Partners, a lightbulb moment arrived while working at a startup as a recent college graduate.
That company, a woman-led, health-focused firm in West Virginia, eventually grew to hundreds of employees and gave Lewis a glimpse into how entrepreneurship could change communities. Today, as a partner at Rogue investing in early-stage companies, that experience still informs her focus.
“That was an eye-opening experience for me to realize that if you invest in people who then grow companies, and grow jobs, you can fundamentally change the communities in which you live. That is what I hold fast and true,” Lewis said.
Portland-based Rogue invests in undercapitalized founders spanning SaaS, enterprise tech and consumer health tech, and generally looks at companies with between $500,000 and $1 million in revenue. At a Founders Network session, Lewis — who also runs the Rogue’s women’s fund, called Rogue Women — shares her advice for young companies looking for funding.
- Knowing your numbers and the assumptions behind them
- Understanding your competition and market positioning
- Recognizing Your Investor’s Motives
- Conveying the Right Team Dynamics
- Avoiding too Much Dilution Early On
“We like to pride ourselves on being that first-round or second-round institutional partner that comes in and really helps at the stage when you have maybe five people, and a year later you have 30 people,” she said.“Know your numbers: Surprisingly, sometimes CEOs don't. I care less about your exact financial projections than the assumptions going into them.” - @carolinejlewis Click To Tweet
That need is particularly acute for women founders, who are disproportionately undercapitalized. The majority of venture capitalists are men, as are the majority of venture capital recipients. An estimated 97% of all venture capital dollars go to male founders, despite evidence that women-led companies deliver superior returns and operating results over the long term.
Whether a woman-led startup or not, the standard traits that investors look for are passion, resolve and a unique solution to a problem that doesn’t yet exist in the marketplace. It’s okay to have competitors, Lewis says: What matters is that you have a pathway to growth in a very large market. Founders should also have a good understanding of how venture capital works; namely, that those investors are accountable to their limited partners and must deliver certain returns.“It shouldn't be about how much you raise -- it's how well your company is performing.” - @carolinejlewis Click To Tweet
“Know your numbers: Surprisingly, sometimes CEOs don’t. I care less about your exact financial projections than the assumptions going into them,” she added. “I appreciate when founders say: Here is my competition. Here’s where we’re similar, here’s why we’re different, and here’s how we think we can beat them.”
For founders making a pitch with a co-founder or teammates, consider in advance what dynamics you convey. Investors want to see a team that is well-balanced, and that works well together with complementary skills and strengths. Your pitch should reflect that, and communicate that your partnership can go the distance.
There are other potential pitfalls when pitching to venture capitalists as well.“I don't care if you've raised a billion dollars, or if your company is valued at a billion dollars. I care about whether you have good, fundamental operating principles that warrant the value it has.” - @carolinejlewis Click To Tweet
“For early stage founders, a common early mistake — whether through over-stacking convertible notes or by teaming up with the wrong investors — is giving away too much equity in the interest of getting money in the door quickly. There’s value in having deals be relatively simple and straightforward,” said Lewis.
Another is getting overly caught up in your valuation, or how much you raise in a particular round. Neither are indicative of your startup’s potential for long-term success.
“It shouldn’t be about how much you raise — it’s how well your company is performing,” Lewis added. “I don’t care if you’ve raised a billion dollars, or if your company is ‘valued’ at a billion dollars. I care about whether you have good, fundamental operating principles that warrant the value it has.”