By: Sarah Mishkin
MICHELLE Lam is a former venture capitalist and once served as chief financial officer for a data company bought by the US’s Securities and Exchange Commission. Now she is a start-up founder, working out of an office in a trendy San Francisco neighbourhood lined with racks of the stylish yet sensible-looking lingerie, mostly bras, that her company True & Co designs and sells online.
She launched True & Co in 2012 after a frustrating shopping trip. She realised she could use her experience in data analysis and management, and her insights into the problems women encounter while shopping, to launch her own start-up. By crunching data on return rates and customer feedback and using that to redesign and launch products quickly, she says True & Co can make better fitting clothes.
Female start-up founders remain a minority but Ms Lam, who was the first female principal at Bain Capital Ventures, is one of a growing number in Silicon Valley specialising in e-commerce.
“We’re at the point in history when we have more experienced women who have exactly the background that VCs trust — and the observations as to how to tackle a space — that are the hallmarks of a good entrepreneur,” says Anna Zornosa, founder of e-commerce clothing company Ruby Ribbon.
About 14pc of venture capital investments this year in the US have gone to companies founded or co-founded by a woman but the figure for e-commerce start-ups is higher and rising quickly, according to PitchBook, a VC and private equity research firm.
About 14pc of venture capital investments this year in the US have gone to companies founded or co-founded by a woman.
Among e-commerce companies, nearly 40pc of the start-ups winning venture capital backing were founded or co-founded by women, according to PitchBook. That is up from below 20pc in 2009.
Many investors find e-commerce difficult to get right. E-commerce start-ups must master not only technology but also logistics, including multinational supply chains, inventory and consumer marketing.
But e-commerce is attractive to some entrepreneurs and investors precisely because the difficulties mean it has fewer competitors as well as room to expand. Despite the efforts of Amazon, eBay and others, less than 10pc of retail shopping overall in the US happens online. That has entrepreneurs racing to figure out how to sell online the types of goods that people buy primarily offline.
Among the more stubborn categories are women’s beauty and fashion, areas where many new female founders have chosen to focus.
Checking fit, quality and colour is hugely important but hard to do virtually. Many of the new companies are trying to develop business models that can get those shoppers to feel more comfortable making such purchases online, an area in which these female founders, many of whom are not engineers, are trying to find ways to innovate.
“Not to be flippant but most VCs want to back the founder who knows something about the product,” says Amy Errett, a VC-turned-hair-dye- entrepreneur.
Ms Errett says she got inspiration for her company, Madison Reed, in the hair colouring aisle at a pharmacy and noting how poorly designed the kits were.
Her company is experimenting with how it uses technology to sell hair dye to women for use at home. The start-up, which raised $12m in venture backing this year, sells mostly to women who want to mask greying hair. In her mid-50s, she matches her short dyed blonde hair with chunky, colourful glasses.
As colour often shows up inaccurately onscreen and women are sometimes unsure about how to use the dye, the company has staffed a call-centre with professional stylists to give advice on colour and application, and is experimenting with app features that would let users take video clips of their hair to get feedback on which colour to use.
Although investment in companies set up by women has increased, raising funds from mostly male investors, particularly for brands aimed mainly at female consumers, has its frustrations. At worst, they may even face harassment or inappropriate propositions.
More commonly, however, the issue is that male investors “often feel they can’t add value to the business because they don’t have expertise in the space as a consumer”, says Doreen Bloch, founder of Poshly, a consumer data analytics company specialising in cosmetics.
Ms Errett says some of the investors she pitched to confessed both that they dyed their hair, and were unsure how widely hair dye is used by middle-aged women.
A former senior manager at online brokerage E*Trade and general partner at venture firm Maveron, she has had to explain to sceptical colleagues and friends that she had chosen to tackle what they saw as a humble niche with far less growth prospects than other sectors also taking off in Silicon Valley. “Everyone was like, ‘hair colouring’?” says Ms Errett, recalling their disdain.
Jane Park, founder of Julep, which makes and sells nail polish, says some investors were missing the point when they wanted to know how quickly women use up polish and therefore need to replace it.
“It’s not like toothpaste,” Ms Park, a former executive at Starbucks and Boston Consulting Group, told them. “It’s a fashion item.”
She had to do a bit more explaining about why the beauty industry could be a good fit for venture capital investment in e-commerce.
“It’s something I felt they were unnecessarily fearful of,” she says. “I was like, ‘Hey it’s big, and it’s high margin and there’s a huge opportunity to go online — you should be able to get your mind around it with an hour or less of research’.”
In April, Julep announced a $30m round of funding from investors including the Silicon Valley firm Andreessen Horowitz. Part of the reason for the increase in the number of female founders, suggests Ms Zornosa, is that there are more women with experience of the technology industry — even if the numbers are relatively small, particularly in technical and engineering roles.