It is easier to conduct an experiment in space than raise funds
"Are you worried that funding is going down, Fatma?" asked one of Pheronym's investors a few months ago.
“No," I said. "It seems like everyone is going to be experiencing funding the way we/women founders experience it all the time."
Techcrunch states, "Women-founded startups raised 1.9% of all VC funds in 2022, a drop from 2021". This is even worse for minority-founded startups. For example, last year, Latina-founded startups raised 0.44 %, and black women-founded startups raised 0.41% of all VC funds, according to Project Diane. Imagine fundraising as a first-time entrepreneur with an ethnic name like Fatma. I had an easier time conducting an experiment in Space at the International Space Station than fundraising from investors.
Women founders' funding environment is like the rain in the Sonoran Desert, a green desert where plants had to develop many strategies to thrive in these harsh conditions. Very early on my entrepreneurship journey, I noticed that investor funding was not as readily available to me as to peer startup founders in accelerators and mentorship programs I participated. Furthermore, the criteria I was held up to were more stringent. The terms my peers and I got were like day and night. To bring Pheronym's technology to the farmers, I had to develop funding strategies. I always had to have multiple backup plans (Plan A, B, C, D, E….). In addition, I had to have a very diverse funding strategy (a mixture of dilutive and nondilutive funds) from various sources such as incubators, accelerators, fellowships, mentorship programs, grants, and more. With the tight capital access, I had to be very capital and time efficient. The milestone plans always included accomplishing the maximum number of milestones. Since I don't get the terms my peers get, I had to be strategic to allow Pheronym to walk away from bad terms and be ready for a great opportunity.
You may think, “If women founders are so resourceful, why do they need money from venture capitalists (VCs)?" High-impact technologies require passion, time, and money to commercialize.
Fundraising from investors has one aspect that I learned the hard way. I've heard “Investors invest in the founders/teams, not the ideas" more times than I care to remember. For early-stage start-ups, founder risk was followed by market risk and technology risk in decision-making for investment. I was able to derisk market and technology with tangible milestones in the past six years and created an investor ready-startup. However, founder risk was the most elusive one to have a solution. It was like a COVID-19 variant, which kept changing depending on the investor I talked to.
The lingering question: What is about founder risk that makes investors in a VC firm say, "Yea,” or “not Nay"?
The answer came at an investor conference I was invited to pitch in the fall of 2021 in San Francisco. There was a pitch that started with a quote from Steve Jobs. All the investors were hypnotized by the pitch. They thought this was the best pitch, and the team had the best founders ever. I had never thought until that moment that summoning an iconic founder like Steve Jobs could give a founder credibility like that. So founder risk was the perception by investors about the founders! It did not have to be based on reality or the founder's actual skills, abilities, or accomplishments. There was very little I or any individual founder could do about it. In short, the iconic successful founders like Thomas Edison, Steve Jobs, Bill Gates, and Mark Zuckerberg inspire both men and women founders and investors. These icons' ability to lift founders is timeless. It works much better for men than for women founders. This is a problem in the system.
How can the business community improve investor perception of women founders? We need both long- and short-term solutions. We need to hear more news about successful women founders/leaders in business to inspire both women and men investors. There are some efforts in this direction. For example, there was a highlight for women entrepreneurs in 2021 in Business Insider “Meet 22 women who launched and led startups to an IPO, an accomplishment few female founders have ever reached” by May Teng and Alyson Shontell. I asked one of these amazing women founders, Pam Marrone, to be Pheronym's advisor. She has been a phenomenal advisor and then a board member for Pheronym. A recent article for women leaders in synthetic biology was published in 2023 in Forbes, “Meet 10 Women Who Are Leading The Synthetic Biology Revolution,” by Dr. John Cumbers. These highlights are helping women founders secure investor funding.
What about the women founders who are not considered white? The funding rate is even less for the rest of us, 0.4% for Latino and black founders. Getting food from a lion's mouth started looking easier. As the long-term strategy to change this funding gap, we need the stories of women founders from all backgrounds that inspire both men and women investors. To accomplish that, we need high-impact business magazines and journalists willing to write about the inspiring accomplishments of women founders from diverse backgrounds. For example, Dr. Amy Wu, an award-winning journalist, published a book in 2021 titled “From Farms to Incubators: Women Innovators Revolutionizing How Our Food Is Grown” highlighting women founders from very diverse backgrounds. I really like this book because it is an excellent example of diversity and inclusion, recognizing the accomplishments of all women founders. There are successful woman role models to inspire founders from all backgrounds and ethnicities. Of course, this is a long-term solution. The future generation will harvest the fruits of this effort.
What do I do in the short term? I asked my mentors how to fix it. The number one suggestion was to add an advisor or a business person to my team. Finding a business person who satisfies investor perception, has experience with product development (not a ready-to-sell product), has brought a novel product to the market, loves pheromones for eco-friendly solutions, and is willing to work for a startup with a very tight budget is challenging. We have been making progress in recruiting the right team members and derisking the founder/team. In 2021, we received Angel investor funding from Sacramento Angels, Pam Marrone, Mark Haney, and Monte Bottens, a regenerative farmer. Furthermore, Pam joined our board of directors in 2021. As we move forward, we are looking for new partners, advisors, and mentors to join our fantastic team at Pheronym.
Authors: Dr. Fatma Kaplan is the CEO/CSO of Pheronym and Activate Berkeley Fellow & Berkeley Lab Affiliate Cyclotron Road Cohort 2021. She is also an entrepreneur and an accomplished scientist with experience in both biology and chemistry. She has a Ph.D. in Plant Molecular and Cellular Biology and postdoctoral training in Natural Product Chemistry with a focus on isolating biologically active compounds. Dr. Kaplan discovered the first sex pheromone of the nematode Caenorhabditis elegans and published it in Nature. Then she discovered that pheromones regulate other behaviors in both parasitic and beneficial nematodes. Dr. Kaplan conducted the first agricultural biocontrol experiment in Space at the International Space Station in 2020. She has very high-impact publications, and her dissertation (beta-amylase’s role during cold and heat shock) was cited in textbooks within 5 years of publication. Dr. Kaplan worked as a scientist at NASA, the National Magnetic Field Laboratory, and the US Department of Agriculture — Agricultural Research Service. Dr. Fatma Kaplan and Mr. Karl C. Schiller co-founded Pheronym to bring nematode pheromone technology to the market and to provide effective, non-toxic, sustainable pest control for gardeners and farmers.
