Capital Gains: StandUp Ventures’ Michelle McBane on Why We Need More Female Founders
You could consider Michelle McBane a storyteller of sorts.
The managing director of StandUp Ventures, a Toronto-based venture capital (VC) fund that specializes in women-led, high-growth companies, McBane is helping Canada tell new stories about its business talent by challenging the existing narrative. With nine investments to date, StandUp focuses on companies with at least one woman founder in a C-level role with significant ownership proportional to the stage of the company. The way they see it, the more room we create at the top for a diverse range of leaders, the better our ability to break through biases, create new opportunities, and enhance the bottom line.
How does an organization benefit from a diverse leadership team?
Right now, there is a war for talent, especially in Toronto. If you look on a website and see someone like you on there, you’re more likely to apply and that was one of the big issues back in the day with the Ubers of the world, if you will. It was a bunch of white dudes who hired their friends. That’s how the company grew and it was fairly toxic because you just had one group of people.
The whole point is that diverse organizations will out-perform homogeneous ones. If you get female leaders early on at the funding level, they’re going to have an influence on the company and create a very different culture. When you start growing fast, you can get offside really quickly. But, if you’ve built it in from the beginning, you’ll be a lot more balanced and don’t have to go fix that at a later date. It’s harder to do.
What do you think have been some of the biggest misconceptions for investors around women-led businesses?
For a long time, a female founder would think, “Oh, I can’t start a technology company because I’m not technical.” That would never stop a male founder. Most male founders are not technical. They are business people. They had an idea that they wanted to productize and build a company around. I think women are realizing that they can go find a co-founder who is technical, be it a male or female, to then start to build their technology company.
What biases do you think impact the decision-making process for VCs?
There is a founder I work with who was talking to, I assume, an American VC. He said to her, “You’re never going to raise venture funding because you’re a female founder, you have three kids, you’re married, and you didn’t come from an Ivy League school.” Those are the standard biases that you get. People, especially at the seed stage, invest based on pattern recognition. You have folks in the US who will only invest in those who came out of Facebook and Google. Others will only invest in those who went to the so-called Ivy League schools. It’s not that anyone had a better idea or not, it’s just their process to recognize what they can do [is different].
Do you think investors mostly support businesses that they can relate to?
100 percent. My observation has been that women often productize something they know well and have experienced. They come from the industry. They recognize the problem and identify the opportunity early on. I find women deeply understand the problem that they’re developing the foundation for and whether or not it’s a B2B or B2C opportunity.
What advice do you have for women who are talking to investors and trying to raise money?
You should make sure that with any business development opportunities, you’re targeting a VC that’s appropriate for your business. Then, try to find commonalities in the portfolio with other opportunities. Ensure that you leave the potential investor with an idea of how you’re going to be successful together and how you plan to build the business. If you’re a second-time founder who has been successful, it’s a lot easier than a first-time founder. With the latter, you’ve got to get above that noise. And it is really noisy.
One of the companies I work closely with, the founder did a really great job of pitching. Then she followed up immediately and we just developed a great relationship. She’s a compelling pitch person, which is a really important skill that someone on the team has to have. One of the founders has to be able to pitch stories very well to investors and customers.
"Ensure that you leave the potential investor with an idea of how you’re going to be successful together and how you plan to build the business."
What questions do you think all entrepreneurs should ask themselves before building a company?
I think it’s being glamourized right now. Tech startups and founders who have been successful are just starting to tell the story about how rewarding it is, but how hard it is, too. If you’re going to go down this journey, it’s important to fully understand that. It’s got to be something that you are willing to give your all to.
Also, not every business is a venture business. You have to figure out if you’re going to go down that path because, if you are, you take away a lot of optionality. As investors, we’re taking money from other investors, and we have to give it back. It falls down the food chain. We’re not granting money, we have certain expectations. You have to make sure that the business you’re building has the ability to go down that path. Not all businesses are venture-grade businesses, and that’s fine. You really have to do some soul-searching to decide which way you’re going to go.
In your experience, what are the ingredients that make up a recipe for a compelling story?
Resilience is a big one. I like female founders who have strong families around them because they need a really strong support system. We always look to make sure that that kind of support is embedded because it can be a very lonely road. When we see a group of founders, we like to understand how they came together and worked through the bumps of their working relationship. We also want to make sure that there’s a very candid relationship together with the co-founders to go through the ups and downs. That is probably the most important thing. We talk about teams finding traction and technology, but at the seed stage, the most important thing is the team and if they have the operational expertise to do what they’re going to do. Do they come together as a team in a way that we believe? You can tell pretty quickly if a team is not going to make it.