Entrepreneurs quickly become comfortable with the word “no.” They may hear it about a thousand times before they get the “yes” that takes their business to the next level. This rings truer for minority and women entrepreneurs who have the added hurdle of wooing investors who are unfamiliar with the communities they serve.
A New York magazine writer, Kevin Roose, recently came under fire when he deemed the website NaturallyCurly, a leading social network and community for people with wavy, curly and kinky hair, as a dumb investment with “no redeeming qualities whatsoever.” Many felt that Roose ignored evidence that supported investment in the site including the potential market of over 80 million women in the US with textured hair. Roose later updated his article to say he only took issue with the social network component of the idea, but his generalizations underscore an issue many women and minority entrepreneurs face.
Gatekeepers to the business world – investors, manufacturers and the like – aren’t known for their diversity. Largely white, male and upperclass, there is a myopic mindset that makes it all to easy for them to miss the potential and profitability of businesses that target consumers outside of the mainstream. It also creates an additional hurdle of shortsightedness for minority- and women-fronted businesses to overcome.
Kevin McFall, Senior Vice President of NewME Accelerator, an incubator for technology start-ups in the competitive industry of Silicon Valley, traces the root of the issue to a lack of ability to pattern match. “Patterns exist in Silicon Valley of Ivy League dropouts being the ones identified as having all of the big successes associated with their ventures, so some investors look to match that pattern and find others like that to invest in,” said McFall.
“Because there has not historically been a lot of female and multi-cultural entrepreneur success stories, those patterns aren’t as visible or as plentiful as there are of other patterns.” Fair or not, the onus is on entrepreneurs to educate investors on the potential of their ideas and to have the tenacity to not let hearing “no” stop their pursuit of success.
There is no shortage of stories of entrepreneurs who went on to success after major players passed on their ideas. Sara Blakely, the founder of SPANX met opposition from patent lawyers and manufacturers who told her, her idea for spandex-type undergarments to slim and smooth your figure was crazy. She went on to become the youngest self-made female billionaire in the world.
Bethenny Frankel, founder of Skinnygirl Cocktails, has been vocal about major liquor brands passing on her idea because they thought women wouldn’t buy low-calorie spirits. Skinnygirl Cocktails is now the fastest-growing spirit brand in the industry.
These women overcame initial opposition because not only did they have a good idea, but they were able to demonstrate success on a small scale. An idea is only worth something if a sustainable business can be built around it. Seth Godin, author and entrepreneurship guru, offers five basic components of a good business model:
- Profitable – Do the revenues from sales exceed the cost of supplies and labor?
- Protectable – Is it difficult for a competitor to enter your market? Have you accounted for potential rip offs of your idea?
- Self-priming – Can your business sustain itself? Will product sales generate enough profit for you to develop more products to sell?
- Adjustable – Is your business model flexible enough to adjust its strategy in response to unexpected challenges?
- Exitable – Have you developed a strategy that will allow your business to function without you?
If you answered yes to the questions above, you’re ready to take your idea to the next level. Tech blogger Paul Graham’s guide to presenting to investors is a good resource. He underscores the importance of being specific and narrow in your description of your idea, having data with specific numbers, and telling stories about your consumers that illustrate how you solve a problem.
The business world is becoming increasingly niche. Every day we are seeing individuals and companies tapping into the passions and needs of special groups. Investors that want to make money are opening their minds to new markets and ideas. The burden of proof is on entrepreneurs to show their potential and profitability.