Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
You’ve heard the one about the lack of women-led companies with a scalable business model attractive to investors beyond family and friends.
A group of five angel investors, founders of the latest version of the Sofia Fund in the Twin Cities, are poking holes in that story.
CEO Cathy Connett, a long-time business adviser, and her four compatriots raised nearly $4 million in January from some 50 investors for Sofia Fund II, which will rise to $5.9 million later this year.
They’ve made their first investment, in Kidizen, our cover story in this issue, and will look to invest between $100,000 and $500,000 per company in 10 to 20 companies over the next several years.
The model is different from Sofia Fund I, which raised $1 million, invested in nine companies, and had more than 30 investors actively involved. (Impressively, seven of those nine companies are still operating, and those original investors are waiting for liquidity events.)
For Sofia II, they changed the model. “It got to be difficult to have 30 people act quickly, so there are just five of us running the fund,” Connett says, and all the rest are passive investors.
The others in the Powerhouse Five, as I like to call them, are Lisa Crump, Joy Lindsay, Barbara Stinnett and Dee Thibodeau.
Plus, as Connett notes, they couldn’t do follow-on investments with the first fund, because their fund total was too low. “We were really a little too small to take a lead in deals.
This time we’re looking to take a lead role and negotiate and get a board seat. And we did that with Kidizen,” she said.
Getting that board seat isn’t just for ego. “We think we can add value to our investments, and by not being in the lead role or getting board seats it’s difficult to always add your value,” Connett says.
Here’s where the story gets interesting to me, a career-long advocate for women entrepreneurs. Sofia Fund II is investing in women-led companies, in which women are actively involved in the management team, part of the leadership team and are equity owners.
Since closing the fund in January, they had more than 20 companies apply for funds officially, and another 10 or so that unofficially did so, and the applicants were impressive indeed, she says.
Furthermore, among the five partners, they’ve invested in some 35 companies over the years on their own. Connett heard too many times this remark: “I bet there weren’t many that were women-led.” So she decided to check it out.
“We found that 51 percent of that 35 were women-led companies. And 58 percent of the successful exits were women-led,” she says, even though the five hadn’t set out to fund women-led firms—they were simply looking for good deals to get a return on their investment.
“People believe there aren’t women-owned companies out there that are scalable,” Connett says, and the investors behind Sofia Fund II show that just isn’t so.
What’s more, they’re proving it in what I believe is the best way possible: no special favors for women-led firms, just because of gender, but rather a hard-nosed bet on which companies are most likely to come through.
As Dori Graff says, the co-founder of Kidizen, the Sofia Fund investors grilled them as hard as anyone. “They were focused on the numbers, and we had good numbers to show,” she says simply.
Here’s hoping Kidizen, and the next companies the Sofia Fund chooses to support, will continue to prove the conventional wisdom wrong.
Beth Ewen
Editor and co-founder
be***@*******ag.com
