by Lionesses of Africa Operations Department
We often work with Lionesses who have come up against the usual funding brick walls (no need to repeat, regular readers will know what we are talking about. New readers? Do we have a treat for you - see here one of our many articles highlighting the iniquities of finance!), and who need a helping hand.
The Lionesses we see all have fabulous businesses that they have bootstrapped or managed to finance through friends and family (and occasionally a forward thinking Angel Investor in love with their dream and their potential), yet cannot move to the next step in the funding cycle. Funding required to ride the Cash Flow demands of their growing company for example, or they will have to bootstrap to the next level at a slower pace. Or of course they could just put the foot on the gas and hope, which sadly never seems to have a good outcome.
As we so often say - whilst lack of profit kills a business slowly, lack of Cash kills overnight and as if to prove this point WeWork filed for bankruptcy this week (once valued at over $40 Billion). Never had any profits since its formation in 2010 (yes) but did have the cash to keep losing money, thanks to its founder’s relationship with many VC/PE investors and bankers who kept on doubling down on the dream. Once they woke up and smelt the coffee, it was all over. Interestingly having left WeWork, the founder Adam Neumann has been financed yet again - with a cool $350 million in a deal that reportedly valued his new real estate venture, Flow, at $1 billion before it had even launched (see here) - go figure as they say! How’s that for a network!
This network is absolutely essential for Mr.Neumann, so why not for mere mortals such as us? Yet we see from the Lionesses who reach out to us for assistance and advice on the funding side that one of the most common mistakes they make is not building a network or using their network correctly. Yet building your network simply has to be taken very seriously.
For one, investors the world over prefer warm introductions. No one likes cold calls, investors and indeed bankers are no different, so if you can find someone they trust to introduce you, that really is first prize. If you find someone they trust, have worked with before and who happens to be their cousin and an old school chum (you get the idea), even better! But aside from those very lucky and very rare breaks, how can one consciously move towards building such a network? These things don’t grow on trees!
Obviously we have to take a moment to point out what is wrong for the globe with ‘warm introductions’ being the link to finance - if you are an investor or banker or dare we say a member of a country’s DFI investment team reading this and you have to take more than a nano-second to think about it, then that is even more worrisome. As TechCrunch kindly point out here in their article ‘Warm intros are awful for diversity, so why do investors keep insisting on them?’: “A warm introduction is the only way to get in front of investors at many VC funds. That’s great for people who are already hooked into the startup [VC] ecosystem, but you don’t have to look for very long to realize that this is not a very diverse group of people.”
They don’t hide it either - TechCrunch highlight a VC’s website that states:
“We’d love to hear from you.
The best way to reach us is through someone we mutually know.”
There is an article about diversity in hiring that could have been written for investing by James Nash (here), where he quotes a McKinsey report (here) that shows those companies with a diverse workforce are “36% [by ethnic diversity, 25% by gender diversity] more likely to financially outperform those with the least. This is because diversity increases revenue, boosts innovation, sparks creativity and leads to better decision-making”.
Boston Consulting Group confirm the investing angle (here), finding that “…startups founded and cofounded by women actually performed better [than men] over time, generating 10% more in cumulative revenue over a five-year period…[and] [f]or every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.”
James Nash recognises that many companies have diversified their workforce, but are not getting the required results, because they “…have failed to consider an approach to diversity that goes beyond “add diversity and stir.” Diversity is not a numbers game wherein the solution is to merely increase the numbers of traditionally underrepresented groups in your workforce.” In other words, if diversity is a tick box exercise, you are doing it wrong and certainly won’t gain the upside such an essential move can deliver.
Also noted by one Government in their review this year of their own DFI’s efforts towards gender investing, suggesting that possibly the 2X Criteria is being used as a tick box or as they diplomatically state, “static metrics…used to categorise and label investment”.
We have removed the name of the DFI to spare their blushes, but the committee report reads as follows: “We do not find [DFI’s] approach to tracking gender lens achievements to be dynamic or suitably stretching to achieve greater development impact…It is therefore difficult to assess how [DFI’s] investments have performed against these output and outcome metrics, and truly identify whether all its investments are delivering real impact and value for the taxpayer.”
So if “add diversity and stir” via tick boxes (sorry, ahem) - via “static metrics…used to categorise and label investment”, is suggested to be happening even in some corners of the DFI world, and: “[a]mong the most often cited reasons why VC investors might be biased against women is homophily – the tendency of individuals to associate with others based on shared characteristics…Gender can act as a common driver for homophily.” (European Investment Bank, here), it is even more essential that we somehow find a way to break into these networks.
As we often say (sigh), once we know the rules, (larger sigh) we know how to play… So where were we - oh yes, Networks…
Whilst we shall never celebrate or enjoy being part of a tick box exercise, there is a great deal to be said for “if you can’t beat ‘em, join ‘em”. Somehow we need to get noticed, become part of the inner sanctum, and we can only do this through expanding our own network, one link by one link, or by climbing up and standing on the shoulders of those Lionesses who have gone before us and built that chain of links into these other networks, or both!
So let’s start building that first link.
We recently reviewed the wonderful (free) book by a truly inspirational Lioness, Dr.Ola Brown, ‘Journey To Series A’ (here). In her book she points out that if you are lucky enough to already have had Angel or pre-seed/seed investors, hold them close because at all stages of your growth you will be reaching out to them for two reasons:
“a. For them to review your deck and fundraising documents like your model, allowing them to make suggestions.
b. For them to make introductions to prospective investors.”
…advice and introductions - warmed ones at that. The joys! These investors have already proved they are serious through actual cash - they want you to succeed and will be very happy for you to use them. Do not waste these links.
Next, we have noticed that Lionesses involved in various platforms, programs and accelerators all too often do not press home this networking advantage once the program has finished. One Lioness we spoke to recently had done extremely well in one accelerator. Now looking for finance to take her to the next level in her spectacular growth - had she reached out to chat to the Accelerator Team? This is a team that would and does have great interest in the successes of all their alumni, have you asked their advice, we asked? Er, no, came the reply, “I didn’t want to bother them.”
At the very worse, they will ignore you (highly unlikely), but who knows they may tell you who may be interested in supporting your next growth spurt & bingo! A warmed introduction. You have tapped into their network. Do not waste these links.
Whilst on these programs think to the future - connect with your fellow students and with the team driving the program. Create a monthly or quarterly update email for them, or reach out when you have some success to celebrate - somehow you must keep them warmed. Who knows when you might need to reach out for advice, or perhaps you can even help them!
Networking is so much about maintaining connections and links.
Those are all easy routes, all laid out and ready. One that involves a bit more work is building your own network through LinkedIn. As it happens, you have a good start, you are a Lioness! This is a link upon a link upon a link - a huge chain of interested connections. Wherever you look in Africa there is a businesswoman who pops up who turns out to be a Lioness!
Reach out to your fellow Lionesses on www.lionessesofafrica.com or also on a platform like LinkedIn. Simply say you too are a Lioness looking to widen your network and of course to be alerted when they post as you are interested in their successes, could you please connect? It is 99.9% guaranteed they will accept, and there - you are into their network. This is important because you can then bring them into your world, ask their advice (these are after all serious businesswomen) and then if you see they are connected to interesting Investors. Ask for an introduction, but remember to be fully (very fully) ready, we only get one chance, so never waste introductions.
Where also to find Lionesses links from which to built your networking chain? Since 2014 Melanie and the Lioness editorial team have been sending out a daily newsletter showcasing or quoting at least three Lionesses per day (do the maths - that’s a lot!). Then since the 2020 UK/Africa Investment Summit where we showcased some truly inspirational Lionesses, Melanie and the team have produced the Lioness Weekender digital magazine, the cover story being on a major league Lioness doing great things, with again around 4 other Lionesses showcased. (If you haven’t read Lioness Weekender, subscribe here: https://www.lionessesofafrica.com/newsletter-signup Don’t be shy, reach out to them, who knows where this link may lead. Even if you are in the same industry, we have noticed on many occasions they have happily given a helping hand.
The helping hand we give to Lionesses is of course for free (Melanie’s favourite chant when it comes to Lioness Membership and everything we do for the members behind the scenes: “All for Free!”), that is because this is a Network, a Community, a Family, a long chain of Inspirational Businesswomen that we are all a part of, and going to bed in the evening knowing we have helped even if only in a small way one Lioness somewhere in the world - seriously, how lucky are we? Your Network, and other Lionesses, especially other Lionesses, will feel the same way, how lucky to be in a position to help a fellow traveller and Lioness. That is the network, the many links, the chain to great changes you have the opportunity to build. Don’t waste it.
As Charles Dickens put it so beautifully in Great Expectations:
"That was a memorable day to me, for it made great changes in me. But, it is the same with any life. Imagine one selected day struck out of it, and think how different its course would have been. Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day.”
Stay safe.