Venture dollars disproportionately flow to founding teams that are exclusively male, while women-led companies see fewer deals and smaller check sizes.
Now a female former startup founder is aiming to eliminate some of the bias that contributes to those disparities by developing an objective score that venture investors and founders can refer to when deciding whether and how much to invest in a startup.
The Startup Investment Model Index or SiMi aims to analyze the maturity of a company based on its financials, customers, market opportunities, products, time to market, competition, team and exit strategy. Based on the strength of those eight categories, a startup is ranked numerically, with 800 being the highest possible score. Different categories are weighted differently depending on the company’s maturity.
The hope is to infuse some data into the subjectivity among investors that can often be the difference between one startup being funded and another shuttering.
A general partner may be more likely to make a deal with a female-led startup if the company’s score is as high or higher than a male competitor’s. Conversely, a female founder may ask for a larger investment or higher valuation if she knows how much comparable companies are raising.
June Manley conceived the idea for SiMi when her own startup shut down in 2017 after she was rejected by about 80 investors, she said. While male competitors secured $10 million checks, the same firms told Manley they weren’t interested in her startup’s sector, she said, or told her they would only invest on the condition that her husband take over as CEO.
“That’s when I noticed that maybe it’s not my startup they’re looking at. Maybe it’s me,” she said. “I decided I had to do something drastically different.”
Instead of launching another startup, Manley created a nonprofit, Female Founders Faster Forward, based in Livermore, California, which is developing SiMi.
In the same way that FICO credit scores help to eliminate prejudice in consumer lending, Manley hopes that the SiMi score will allow overlooked founders equal access to capital.
The nonprofit tested its methodology on a sample data set of 752 startups that received venture funding. The initial test showed a correlation between startups’ SiMi scores and the amount of funding they received, it said.
Manley is looking to raise $250,000 to build a working tool and launch webinars for female and minority founders to learn how to use it. Her goal is for 20 percent of venture funding to go to women-led startups by 2020.
She says venture investors have approached her to invest in the project if she will transition it into a for-profit company. But Manley says she’s not interested going that route. “I want this to be a de-facto product that can be leveraged by every founder,” she said.
Action Item: Read more about Female Founders Faster Forward at www.f4capital.org.
Photo of June Manley, founder of Female Founders Faster Forward.