Disrupting Silicon Beach

by Kristi Mansfield

IT’S EARLY FEBRUARY 2014 in Paddington, Sydney at a tucked away, charismatic oasis in Underwood Street. Hidden to most people except investment seekers, entrepreneurs and philanthropists, the event is the launch of the Springboard Australia accelerator program for female entrepreneurs. The host is wealthy investor Mark Carnegie, although he doesn’t show. He has asked Rebekah Horne, one of the high tech entrepreneurs he has backed, to talk. She gives an honest and grounded account of her experiences raising funds and ultimately exiting the business. It’s tough, fun and worthwhile. She welcomes back three women from last years’ Springboard Australia class, who will later impart the wisdom they gained from the program, and stresses the importance of female entrepreneurship to Australia, the potential to go global and the impact women are already making on the local innovation and tech start-up culture. 

It is clear Rebekah Horne is shrewd, smart and seasoned. Undoubtedly, she needs to be. MH Carnegie & Co is looking for home runs that will see its private funds multiply ten times on exit. This means, in general, that an investment of between $1 to $5 million will be expected to return up to $50 million; such is the nature of venture capital. It is even more cut throat in Sydney where such Series A and B capital, the funding phase beyond seed or angel capital that entrepreneurs call the valley of death, is notoriously hard to come by; there’s a dearth of this type of capital.  It’s not such a surprise that so few women in Australia have reached this level and so few have given it a go. But now there’s a shift, and it’s happened remarkably quickly over the past months as some of the barriers to capital are breaking down and female entrepreneurs are starting up.

One person who has impacted the shift toward more women founding start-ups is Wendy Simpson who chairs Springboard Australia. She has introduced the global accelerator program to Australia and this year is supporting eight women-led businesses in high tech, software and life sciences. In USA, Springboard has helped 80 per cent of the entrepreneurs in its program, around four hundred and fifty women, raise an astonishing $5 billion. Compared with other non-gendered accelerator programs, this outcome is remarkably significant because, Simpson says, not only is it demonstrating the possibility of soaring success to other women, it is a cycle that builds the funding ecosystem for women which will impact local innovation. ‘These women will raise capital and will have seriously strong global businesses. In ten or fifteen years, they will have exited and will be cashed up and ready to re-invest. Springboard’s poster child is Lauren Flannigan, who has started up and sold three software companies, started an angel investment fund and a venture capital fund. This is the cycle we are supporting,’ said Simpson.

Until fairly recently, this process had not been well understood, nor followed, by female entrepreneurs, because traditionally men have dominated the field and access to funding and resources was not readily available. 

Richard Dale is co-founder of Sydney Angels and was a venture capital investor during the first tech boom of the late 1990s. He has had great exposure as an investor in Sydney – it is the start-up hub of Australia, with 65 per cent of start-ups based there – and he has also been a case manager with Commercialisation Australia; working with entrepreneurs seeking funding through the federal grant program, the funding for which was recently put on hold.  He says the high tech, high growth start-up scene was predominately male in the first boom. ‘If you look at the microcosm of the Sydney scene then, there were two female led companies at that time: Michelle Deaker of E Com, who is now at One Ventures, and Elizabeth Lewis-Gray of Gekko Systems. They were the two female entrepreneurs who were successful that I can remember. I don’t remember more,’ said Dale.


WHAT IS DIFFERENT this time around is that it is much easier to launch. Dale says back then it was experimental and exploratory, but now with the ‘new internet’, which is commoditised, more people know how to do it and less capital is required. ‘It’s more about the business model and how well you execute. That makes it more accessible, particularly to women, and more are having a go.’ 

Irrespective of whether the founder is male or female, the opportunity is what matters to investors. Investors are looking for a high growth opportunities, founders with strong track record in execution and a team with a broad skill set that can turn an idea into a profit. 

Luke Carruthers is an entrepreneur who has achieved five exits in his own companies and now invests in and co-founds start-ups. He works with entrepreneurs to achieve profitable exits, targeted in the range of $5 to $25 million, which he says is an underdeveloped ‘sweet spot’ in Australia. Within his portfolio, he is working with four female founders on businesses from cloud-based software to e-commerce and thinks as many as a third of the entrepreneurs driving the current wave of innovation in Australia are women. ‘This is a massive shift from the ’80s and ’90s when men featured heavily. The traditional “wheeler dealer” style male entrepreneur was the predominant image. Now there are blended teams, male and female co-founders, and this is creating better opportunities for investors,’ said Carruthers.

In the previous waves, he says, men were making products for themselves, as many good entrepreneurs do. ‘That means that more of the opportunity space for male-targeted businesses has been explored. This wave, there are more female entrepreneurs and making products for themselves leads them into unexplored markets. Consequently, there’s a higher percentage of interesting female-led businesses.’

The amount of capital needed to start-up has significantly reduced and this, along with an investment community who wants to work more collaboratively with founders, is making entrepreneurship more attractive to women. ‘In the dotcom boom, $3 to $5 million didn’t get a software business far. Founders were severely criticised at board level and many were replaced,’ says Wendy Simpson. 

Now, replacing founders is uncommon and a start-up can get going with low levels of capital, as little as $100,000 to $500,000 in seed funding, to achieve a runway to the next round with greater ease. Early failures by founders are more acceptable and pivots are expected in the lean start-up methodology. Simpson says women can now see that they can start something on the side, even whilst doing their day job, and they don’t have to risk everything by self-funding. ‘There’s more access to seed and angel capital, which helps female entrepreneurs. Today’s angel community is more diverse, and the friends and family round is an interesting phenomena,’ said Simpson.

A friends and family round can kick off a start-up. Baby boomers and self-managed super funds are more prevalent sources of seed investment and, Simpson says, women are more competent at raising this type of capital and moving to the next stage. This competence comes with better understanding of the process and more support globally. The ease of connecting, networking and collaborating with an online community means women are organising in learning communities, which is accelerating their knowledge, confidence and capability as entrepreneurs, and are supporting each other.


WOMEN ENTREPRENEURS ALSO have a substantial and broader skill set, which is what investors are looking for. Being a start-up founder fifteen years ago meant you needed to be able to code software, but today the skills required of founders are much broader. Marketing is as least as important as product development. Female founders have often had very successful global corporate careers and bring a depth and breadth of experience, skills and insight to their business which investors are looking for.

One such entrepreneur is Dr Catriona Wallace who founded digital platform Flamingo, a way for organisations to co-create a whole of experience including product, services, communications, pricing and channels with their customers. The idea came from her specialist expertise as chief executive of one of her businesses, Fifth Quadrant, a management consulting firm focused on customer experience. She is a two times Telstra businesswoman of the year finalist in NSW and a highly regarded global authority, with a doctorate in organisational behaviour.

It is her view that female entrepreneurs more readily adopt a leadership style that enables disruption and innovation, which is essential for start-ups. Dr Wallace says the traditional models of business are no longer relevant because they are built on the industrial models of hierarchy. ‘What we are now seeing is the rise of the feminine archetype in business, in which the leader values and models a strong culture of inclusion and diversity, a strong focus on collaboration, networking, mentoring and connecting, as well as a deep level of caring for people including employees, customers and suppliers. This may take the form of having a strong philanthropic culture, having children in the workplace and an acceptance of emotion in the workplace, and letting go of egos, power plays and politics.’  

Dr Wallace says that not all women adopt this style and conversely men also lead in this way. However, she believes this is the predominate style of today’s successful female entrepreneurs and, as such, we will see significantly more women leading global businesses, either as founders or senior executives. ‘This will inevitably lead to a greater culture of entrepreneurship and as a nation we need to embrace innovation. Corporates struggle with how to innovate and more women stepping into entrepreneurship and experiencing success will lead to greater innovation across the board.’

A big part of success, she says, is having competency to secure investment and the expertise to structure equity investments. Kay Koplovich started Springboard in 2000 motivated by her own personal experience with raising and securing capital for USA Network, the company she founded and grew into a billion dollar business over twenty years. In her twenties, she signed on a silent investor, but unknowingly signed all of her equity away. When the exit of $4 billion arrived, she received very little. ‘Women really need to know how to deal with investors and they also need good legal and financial advisors. Lawyers are so important. If you don’t get your shareholding, patents and IP right, you can fail. We are working with a whole group of lawyers and advisors who can give good quality advice and can take a deferred fee,’ said Simpson. 

With advice, mentorship and skills, women can ride a wave, but as Carol Schwartz, co-founder of Scale Angels warns, the only limitation for entrepreneurs based in Australia is the lack of capital. Scale is an angel investor group that empowers women as investors. It invests significant equity and influence in enterprises that have female founders or women in the senior executive team.

Schwartz says Scale aims to empower women investors to be confident risk-takers, to be part of a due diligence team and to learn to accept failure. She measures the success of Scale on the re-empowering and reinvigorating of women. ‘There is a dominant view in this country that women can’t make high-risk decisions in venture capital. My personal motivation for co-founding Scale is the financial empowerment of women. For example, a colleague of mine told me about an investment banker from Goldman Sachs who had been out of the workforce for ten years and was lacking confidence. She read about Scale, but thought she was not qualified to get involved. I met with her and our CEO Laura McKenzie and she joined up as a Scale Angel. She has been absolutely brilliant on a due diligence team and has her confidence back. This is success.’

The Scale Angels’ network includes talented, experienced women. Laura McKenzie says a decade ago in United States, 8 per cent of angel investors were women and only 4 per cent of the funding was received by women entrepreneurs, now a fifth of angels are women and 13 per cent of funding is received by women.

Whilst the data in Australia is nowhere near as rich, recent reports such as the Crossroads report launched by StartupAUS in April 2014, highlight the need for more entrepreneurs and investors. Women play an increasingly important role. ‘We are seeing a lot of women in their thirties and forties who have had very successful global corporate careers and are now setting up something on their own,’ said McKenzie. She says there is a great deal of research that shows the level of experience of the founder will influence the enterprise’s ability to grow and generate the best business outcome.

Schwartz hopes Scale will have an enormous impact. ‘Firstly, it’s the intangible impact of empowering women as investors. That means, of course, you’re growing the pool of investment capital in our country. By the same token, you are also opening up to women entrepreneurs and management teams access to new sources of human capital and expertise through the investor network. As one of the people involved in Scale, I can say what we’re after is women-led enterprises that are interested in global domination. The basis of a new digital economy is only limited by our imagination.’  

Women have all the skills to go from start-up to global enterprise. The barriers to entry are now easier to overcome, and there is more competency and a developing ecosystem that is more supportive of female success. Investors presumably will invest more because there will be better opportunities available. 

This time around women are in the game. 

From Griffith REVIEW Edition 45: The Way We Work © Copyright Griffith University & the author.