Oriana Papin-Zoghbi
Making purposeful decisions on diversity and inclusion in the workplace goes beyond simply building your team.
As a minority female entrepreneur and co-founder of a women’s health startup, ensuring diversity within our cap table has been a must — and has proven instrumental to our success. Breaking down your cap table to diversify your investors based on a variety of criteria will provide far more value than funding alone.
I have spent the last 10 years working in women’s health, and the lack of diversity in investors and leadership baffles me. From the inception of my company until now, diversifying our cap table has been a top priority that will continue to serve as a key factor when bringing in investment.
Prioritizing diversity will bring a wealth of knowledge, perspective and expertise to the table. We knew that to make this happen, we had to focus on building a product and team that people wanted to invest in. Many startups talk about wanting to adding diversity to their cap table, but how should you go about it?
Set your investor criteria from the beginning
My co-founders and I were all in agreement that we would select our investors based on a variety of factors, such as type of investor (VC, angel, family office, etc.), gender, race, expertise and a deep passion for our mission. While arriving at these criteria, my co-founders and I wrote down reasons why each factor was important to us.
As a startup tackling a problem that affects women globally, it was particularly important for us to have women investors, racially diverse investors and industry professionals who understood the magnitude of the problem we were trying to solve.
Recent studies have shown that women and people of color disproportionately experience medical gaslighting. Seeking out investors who fit this profile was critical to onboarding people who we felt would share our passion for our work and be supportive along the way.
When setting your criteria, you should define your goals clearly and identify the value each investor will bring to the table. As a team, think about what you would want if you could have it your way and why.
As a startup, it’s easy to get distracted and consider accepting capital from one of the first investors that express interest, even if they may not be the best fit. It’s important to stay focused and think about how carefully selecting your investors can impact your business.
Build an investor funnel
As the CEO, I led our investment efforts and spoke to over 250 investors that we handpicked based on the criteria we set. Before I approached these investors, I created a target list that consisted of dream investors and realistic targets. I did everything in my power to talk to every single one.
I treated this process like a sales funnel: I kept an investor pipeline, asked for referrals, kept track of feedback and took every opportunity to seek advice.
When building an investor funnel, vocalizing what you want is crucial to finding the right investors. At the end of each investor pitch, we would express what we were looking for in an investor and why. Finding the right investors is like finding the right team members — you need to be upfront about your expectations and address what you want them to bring to the table.
In our case, the right investors provided introductions to funds that focus on diagnostics, which was crucial to our upcoming Series A raise. They also provided a strong network for hiring capital, personal understanding, industry know-how and international experience to facilitate global expansion.
As we were continually building our investor funnel and reiterating what was important to us, we ended up with the following breakdown of investors:
- 35% private investors.
- 34% women (female investors or female-headed funds).
- 26% venture capitalists.
- 23% family and friends.
- 18% international investors.
- 15% angel groups.
Identify what you can compromise on
Some investors will have certain expectations, needs and demands. As tempting as it may be to bring an investor in, you need to consider if what they’re asking for aligns with the rest of your investor syndicate and with your company’s goals.
When we were raising our seed round, we spoke with an investment group that we really wanted to work with. However, their investment size was significantly smaller than any of our major investors and they wanted the same rights. As much as we wanted to work with them, we couldn’t adjust the definition and terms of major investors for our round. It wouldn’t have been fair to the rest of the group.
That’s not to say small check sizes are not valuable. Some investors put in $10,000 and prove to be enormous value-adds and provide instrumental introductions. The point is that you should consider what accompanies the check and identify the best way to determine who you want on your cap table. You should never bring in an investor because they’re trendy or flashy; always focus on the value they bring to your business.
For many founders, having the ability to be selective when building their cap table is a dream scenario, but this aspect of the business should not be overlooked. Take the time to ensure you’re making the best decisions for your business. Ultimately, build a company people want to invest in, and you will have more control over your cap table.
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