Finding an investor that fully supports your cause is crucial. If you’re not careful, an investor might end up pressuring you to exploit the people you want to serve. Beyond that, there are also multiple factors you need to consider, such as financial models and cash flow.
In this episode, Lyn Johnson and Sara Sparhawk of West Tenth talk about the gender wealth gap and how they seek to empower women founders. They discuss the pros and cons that their financial background gave them in creating a solid financial model and managing cash flow. Finally, they emphasize the importance of finding the right investors.
If you want to raise or invest in a home-based business, this episode is for you!
Here are three reasons why you should continue reading:
Learn about the gender wealth gap and how West Tenth addresses it.
Discover the importance of having value-aligned investors.
Understand the essential components in creating a financial model that will attract investors and manage cash flow.
Visit our website for more insights on cash flow and profit on the Her CEO Journey™ podcast.
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Her CEO Journey™ Patient Capital Series:
The Ins and Outs of a Venture Capital Fund Part 1 — The Journey of Vonetta Young
The Ins and Outs of a Venture Capital Fund Part 2 — The Journey of Vonetta Young
Venture Capital For Good: Investing in Social Impact — The Journey of Lyndsey Boucherle
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Download the Forecasting Guide so that you can create a better and improved financial forecast for your business!
Connect with Sarah: LinkedIn
[05:28] Lyn’s Journey
She and Sara started their careers in PwC’s banking and capital markets division.
Being in finance made them aware of the gender wealth gap in the United States, thus leading to the birth of West Tenth.
The gender wealth gap shows women are economically vulnerable.
Women often leave the workforce to care for children or aging parents. They start businesses from home instead of returning to traditional work.
“[W]e really expect women to bear the responsibility of care in this country, and when they do that, they often leave the workforce in order to care for children or aging parents. But while they’re gone, they develop incredible skill sets, and a lot of them never return to traditional work [...] instead, they start businesses from home.”
West Tenth is interested in uncovering those businesses for everyone in their communities.
[06:33] Sara’s Journey
After working in finance for seven years, Sara made a career change.
She worked for a startup called Aptus, then went to Amazon, where she had honed her skills in scaling and operational expertise.
She didn’t hesitate when Lyn proposed to start a business together.
Sara was excited to help women entrepreneurs grow and succeed in what they love.
[08:49] The Gender Wealth Gap
Lyn noticed her peers, who were either burnt-out professionals or never had professional experience, were exiting the workforce to care for children.
Men usually control household wealth and major financial decisions.
[10:19] Helping Women Create Wealth
Women often feel disenfranchised from traditional work.
There’s a huge disparity between women with professional service skills and those without.
West Tenth focuses on the latter, who often turn their domestic skills into businesses, and helps legitimize their businesses.
“Even if those businesses are small at the beginning, they can be parlayed into other opportunities, either growing that business, or meeting people out in the community that then offer them jobs. All sorts of wealth creation opportunities start with a home business.”
West Tenth is an app where you can find local home-based businesses and work with them.
[12:45] How West Tenth Started
They started a technology business since not enough women get funded in technology.
They wanted to build a marketplace where maintaining home and family and reaching out to other women could meet.
West Tenth does not charge onboarding or listing fees to reduce barriers to entry.
[16:26] Capital Raising Journey
They worked on the concept in 2018 and built the first iteration in 2019.
Angel investors wanted to see something in the market before investing.
So, they bootstrapped with the help of friends and family to release a prototype.
While in the Techstart program, Better Ventures approached them and offered to fund their business.
[18:41] Criteria for Investors
They were careful to make sure that the investors would not push them to exploit the women they want to serve.
While it’s painful to pitch to many investors, it allows you to find people aligned with what you’re trying to build.
“It’s painful to be pitching to a hundred investors to try to find somebody who’s willing to make an investment in you. It’s really painful, and it's very difficult. But one benefit to all that is you’re really finding people who are aligned with what you’re trying to build.”
[21:56] How to Balance Business Growth and Mission
Finding the right investors helps balance growth expectations and mission.
Sara and Lyn don’t feel pressured to compromise because their investors truly care about their mission.
“It's always a challenge to make sure that you’re growing as fast as possible. But we just have people who are just really aligned with what we do, and we don’t feel the pressure to compromise our mission.”
West Tenth found allies to push their mission forward in Better Ventures.
[26:15] Finance Background and Capital Raising
Finance professionals might neglect storytelling, but it is necessary to fundraising.
Nonetheless, a finance background helps build a solid financial model.
“Our finance background may not have gotten us initial meetings. But our finance background helped us close Better Ventures and others into the round once they saw how the financial model really reflected how we think about the business and its growth.”
If you are not well-versed in this area, work with a consultant to help you develop a financial model. They can guide and help you talk confidently about it to investors.
“As a founder, you’re the one that's going to talk to investors. You’re the one that needs to be able to talk their language, which is investment, and talk confidently about your own numbers.”
[29:46] Building a Financial Model
Consider these questions: How do you acquire customers? How do you acquire home businesses? What are the channels? How well do those channels convert?
Make sure not to overwhelm your audience.
Don’t simply hand over your financial model. Instead, use it to get another meeting.
[34:22] Managing Cash Flow
“You have to spend money in order to make money.”
Balance your spending in a way that preserves your runway but doesn’t stifle growth.
“So for us, it’s balancing that is making sure that we’re preserving our runway, but that we aren’t being so cautious about it that we are not growing in the way that we want to.”
Finding room for experimentation in their financial model was challenging.
“I think as investors are looking at founders, they want to make sure that they’re probably right, more than they’re wrong. And they want you to take big bets. And they want you to experiment, because that’s where it really pays off.”
Make sure your investors understand early-stage companies.
Early-stage companies depend on experimentation and might fail.
“I think [investors] need to know that you will take experiments and then you need to also instill the confidence that you'll fail fast and move on to the next thing.”
[40:32] Reporting to Investors
They report informally to Lyndsey, as well as a quarterly formal board meeting with her and another one of their investors.
They also keep everyone updated on a quarterly or monthly basis.
Providing a formal report helps you create closeness with investors. It shows and creates the habit of transparency and discipline.
About Our Guests
Lyn Johnson is the co-founder and CEO of West Tenth, a company founded during her MBA at the University of Oxford in 2018. She’s also a mother and an unapologetic spreadsheet geek.
She began her career at PwC in New York in their banking and capital markets division and later became the CFO of Locus Financial, a financial advisory firm in Santa Monica. While at Oxford, Lyn studied the economic disadvantages that women face as they juggle work and caring for families. That then inspired her to build West Tenth to encourage women to turn their everyday talents into home-based businesses.
Sara Sparhawk is co-founder and COO of West Tenth, a platform for shopping the talents of women in your neighbourhood. West Tenth is a VC-backed startup that completed a Techstars Accelerator program in 2020 and has been featured in Forbes, Tech Crunch, and Crunchbase.
Sara has worked in managerial positions in major companies, such as PwC and Amazon, where she was able to hone her skills and enrich her knowledge in business development and management. She has a Bachelor of Science in Taxation and a Master of Accountancy from the Mariott School of Business, Brigham Young University.
If you want to know more about Sarah, you can reach out to her on LinkedIn.
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Finding investors who are aligned with your goals are crucial to achieving the balance between business growth and pushing your mission forward. You need to be careful — you don’t want an investor who would pressure you to exploit the people you want to serve. If you enjoyed today's episode of Her CEO Journey Podcast, then hit subscribe and share it!
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