Karen Cahn has always had an eye for entrepreneurial ventures. In 1998, after graduating from the University of Wisconsin-Madison, she arrived in New York City to join Salon.com—one of the early pioneers of the now hyper-competitive digital media space. Her next move was to Google, joining the company before it underwent its explosive growth in search and advertising. There,she led various monetization efforts across search, display and video. And in 2006, she started YouTube’s Branded Entertainment business, connecting big brands to video creators as a model for the native advertising revolution that would change how companies make personal connections with consumers.
Cahn’s impressive resume boasts accolades across tech and media, but there’s another sector she’s been helping revolutionize from the ground up—female-founded businesses. In 2016, Cahn founded IFundWomen, a funding marketplace that connects women founders to the resources they need to help their startups thrive. Through coaching, connections, community and perhaps most importantly, capital, IFundWomen has helped women founders across an array of industries succeed by helping them confidently focus their talents on building lasting companies and market-ready products.
Cahn and American Express recently announced that they have teamed up to launch the 100-for-100 Program—a commitment that offers $25,000 in capital as well as coaching and connections to help 100 Black female entrepreneurs grow their businesses. As part of our Office Hours Q&A series on @AmericanExpressBusiness on Instagram, we chatted with Karen to learn about the state of the investment capital landscape for women, learn more about 100-for-100, and understand what her secret to the perfect pitch is.
IFundWomen is unique in that it’s virtualized the investment capital marketplace for women – it’s created a platform for investors to discover and fund entrepreneurs, modernizing the traditional and somewhat clunky VC process. What are some insights or trends you’ve noticed from the “supply and demand” changes over the past few years between investors and women entrepreneurs?
IFundWomen is a two-sided funding marketplace. On one side are women-owned businesses—13 million in the United States and 163 million globally—and on the other side are the individuals, enterprises, brands, and VCs who want to support them.
The problem that we're working on solving is that there is a complete lack of funding options for early-stage women entrepreneurs. Only 1% of companies, regardless of the gender of the founder, will ever raise venture capital. What do the other 99% of startup founders do? They max out their credit cards or they try to take out bank loans. At IFundWomen, we believe that no one should go into debt funding the earliest days of their startup.
Venture funding for female founders is not getting better, in fact it just hit its lowest quarterly total in three years. VCs invested a total of $434 million in Q3—the lowest figure since the second quarter of 2017, according to PitchBook data. The third quarter total also amounts to a 48% drop in funding from Q2, when female founders received $841 million across 132 deals. While the amount of VC dollars deployed in Q3 2020 was relatively similar to previous years, these dollars didn’t necessarily reach female founders, who have been disproportionately impacted by the pandemic.
Recently, IFundWomen of Color and American Express launched 100-for-100 — a commitment to offer 100 Black female entrepreneurs $25,000 in grants to grow and scale their businesses. Would you briefly discuss the specific challenges that Black female entrepreneurs have traditionally had to contend with, and how this program can bring some much-needed social equity to the investment capital space?
According to Amex's 2019 State of Women-Owned Business Report, Black women represent 42% of the net new women-owned businesses started in the last year, which is three times their share of the female population (14%). Despite this, Black female-founded companies have only captured .06% of the VC dollars deployed over the last 10 years, according to Project Diane.
As of September 2020, the majority of IFundWomen SMB members are people of color, with Black/African being our most represented group (over half of our member base). We knew there exists a deeper hesitation in the Black community toward asking for fundraising dollars. Conceptualized by Olivia Owens, who serves as its General Manager, we launched IFundWomen of Color as the go-to-funding platform and community for women of color entrepreneurs in January 2020. IFundWomen of Color has rapidly grown into a community with thousands of members, across industries like consumer packaged goods, retail, tech, and financial services represented.
When this new platform launched, we did not yet know about the global pandemic and ensuing financial crisis that would rock entrepreneurs of color just a few months later. Research out of Stanford suggests that women of color-founded businesses have been grossly disproportionately affected by COVID-19.
Partnering with American Express on the 100-for-100 Program was a natural fit for IFundWomen. It ladders up into our number one key performance indicator of funding volume for women-owned businesses. We can’t wait to see the impact of the grants and education on this group of stellar entrepreneurs.
Overcoming the confidence gap starts with a perfectly honed pitch, and a product or service that people are buying. I find that when my pitch gets more refined and shorter, that my confidence goes up. The more well-received my pitch is, the more confident I feel to give it over and over again.
One major change you noticed during the pandemic is the increase in demand for coaching and funding from more ‘traditional’ small businesses such as brick-and-mortar retail or fitness studios. You were able to help them by categorizing them based on Maslow's hierarchy of needs and then applying the business appropriate tactics. Can you talk about how you’ll evolve this approach as we begin to emerge in what seems to be the new normal?
We are our own customers so at the beginning of the pandemic (through to today), we were facing the same challenges as they were. We knew it was important to talk to our members honestly and openly from day one. It was such an uncertain and scary time for small business owners.
Our own experience made us much more prepared to help them not only save their businesses but grow their businesses. How? First, we made our group coaching free for everyone. We also provided government assistance loan coaching and a COVID-19 relief fund that distributed funds to in-need Main Street businesses like fitness studios and restaurants. We encouraged our enterprise partners to pivot their previously made grant program plans to COVID-relief grants, and were able to give out over $1M in the first 3 months of the pandemic. Finally, we adapted our coaching strategies and used Maslow's Hierarchy of Needs to drive our coaching methodology.
One of the most in-demand coaching topics was how to successfully pivot your businesses. Our strategy focused on how businesses can shift their focus based on the basic human needs of populations, especially those in crisis, and we used Maslow’s Hierarchy of Needs as a reference point. This innovative approach to coaching in a pandemic resonated deeply with our customers and helped them not only survive but thrive during COVID.
Equally as important as elevator pitches in raising capital is networking. How has the investment community evolved to meet the moment of businesses seeking capital in a virtual-first world? How do you think the landscape of discovering and funding new businesses has changed, and where is it going?
No matter what type of business you have, at what stage, you need to have a rock-solid business pitch.
There is definitely a confidence gap that our members report facing. Imposter syndrome is very real for our entrepreneurs. I myself have faced it. We equip our members with the tactical knowledge, and things that they can do to overcome their confidence gap.
Overcoming the confidence gap starts with a perfectly honed pitch, and a product or service that people are buying. I find that when my pitch gets more refined and shorter, that my confidence goes up. The more well-received my pitch is, the more confident I feel to give it over and over again.
At IFundWomen, we are creating a flywheel of not just funding, but coaching and connections. All three things must work in harmony for women-owned businesses to be the successful lucrative enterprises they have the potential to be.
The pandemic sped up the embrace of remote work, which untethered many people from living in the cities their employers are located in. Do you think this change will have an influence on what we think of as start-up hot spots, like SF and more recently, Austin? Do you anticipate, for example, new cities emerging as key areas for investment, or even future unicorns being founded in suburban living rooms?
Frankly, there always have been hidden gems in unexpected places, and we’ve seen this first hand at IFundWomen where some of our most successful businesses are in places like Portland, Baltimore, and Minneapolis.
Women entrepreneurs in Gen Z now looking to start or grow their businesses have both the advantages of being digital natives (and maybe a little more comfortable with alternative sources of funding) and the disadvantages of coming up in a pandemic environment that’s brought about uncertainty and austerity. How should they approach raising capital? What do they need to do to get off the ground and succeed?
Having a business means that strangers are willing to pay for the product or service that you are selling. For Gen Z, who are hard-working digital natives, my first piece of advice would be to always be “selling” on your social media. By selling, I mean talking up your business, offering your potential customers content that brings value to their lives, and engaging them with how you are building your company. Crowdsource both information from older generations who have been there, done that, and then crowdfund your first round of capital so you don’t go into debt funding your startup.