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Removing The Middle-Man: How We Took Shopping Out Of The Stores And Into Your Hands

Business

I am always texting. I haven't been on Facebook since college, (crazy, I know), I don't get Twitter, and Instagram is growing on me. Yea, I sound a lot older than 31, but I'm not alone. I live in my texts. We all do. Emails are work, apps are annoying to download and I never remember to open them. But there's a reason that text messages have a 96 percent open rate - they're from my friends and family.


It pains me to say that apps are annoying because that's the world I'm coming from. I've built and run two iPhone apps and learned a lot - enough to never build one again. Don't get me wrong, building apps was a lot of fun. Building one for CollegeHumor was particularly fun. But we bent over backwards to get people to download it. Then we did backflips to get people to open it, and play it. It was an awesome experience that we had to beg people to have. You don't have to beg people to send texts.

I wanted to tether the real world, where your real friends and family actually talk, to a commerce experience. And that's why I started Shop Or Not, the weekly text message you can shop. We text you one new thing, once a week. That's it.

Your friend sees something you'd love and texts you a pic of it. We're that friend. All you have to do is text back 'Yes' and the item is shipped right to your door. That's it, pure texting - just one picture and a few sentences. No website, no app. So many times when I found myself out and about, I wouldn't buy much (yes, I hate shopping, and yes, I started a shopping company), but I would so often take pictures of things I saw that my friends would like. It is so simple, something millions of people already do every day, and best of all for someone who hates shopping, the whole experience takes about 30 seconds. We're taking you out of the store, and meeting you where you are these days.

Co-Founders, Kelly O'Malley and Kate Myers

Everything we text about is totally curated, from small batch coffee pods made in Montana to spicy chili granola made in Brooklyn to leather bags sewn in Tennessee and pocket squares made in Texas. Each product is one of a kind, made in America, we absolutely love it, and you've probably never seen anything like it before. If you only ever want to text about chocolate, great. If you only want items made in Colorado, great. Through the text conversation, we get to know you, chatting back and forth about what you like, and that way we'll be able to text you only the best stuff. If you text us any questions, like, “Is that chili granola super spicy? I'm more into sweet breakfast", then we remember that too and make sure you don't get texted anything you'll want to spit out.

Retail is evolving rapidly from the times of wandering stores and running your fingers across fabrics. Those were the days, when you only had so many choices and you could touch them all. Shop Or Not covers one of those crucial bases: fewer choices. In the area of 20-Tabs-Open-On-My-Laptop, fewer choices is a great thing. The in-store experience is limited by four walls and shelf space. Wandering around, revisiting, and discussing items with your shopping mates is a pretty lovely, cozy experience. We'd like to recreate a bit of that intimacy, while also making it so much simpler.

I believe texting, an old-fashioned technology, is the next best thing to the in-store experience, the perfect tether between the old and new ways of shopping. It's so intimate. Which means it's all about trust. It's not an ad or an app telling you what to get, it's your friend. Texting you just one thing at a time. From someone you know, who knows what you'll like, and knows that if you don't like it, you'll text back a thumbs down emoji.

Keeping it super simple is super underrated. I learned that from years of making fun but fundamentally complicated apps.

Texting is really good at some things, not so great at others. It's one way to reimagine the retail experience, but not the ultimate reinvention. For example, I would never buy a couch over text. That's something I need to look at for a while and probably put through the highly sophisticated Butt Test. Texting, however, is really good at reminding you of things, for instance. With every Shop Or Not text, you can reply 'Yes' to buy. After a while, we saw a lot of customers responding 'Gift' to be able to send the item to someone else. That gave us an idea. We texted our customers to ask, “Any special occasions coming up? Let us know your big dates this year." And we got an overwhelming response rate: people texted us back with birthdays, anniversaries, graduations, and so many special times. We scheduled texts two weeks out from every occasion to say, “Hey there, your mom's birthday is coming up, here are three gift ideas." And we watched the champagne marshmallows fly off the metaphorical shelf.

Technology moves really fast. People don't. I mean, I've run multiple tech companies and I definitely don't. Forcing apps and bots and complicated websites on people isn't what they want, it's what brands want. What people want is simply to talk to each other. Of course. So we met them there. Said hi. And texted them one awesome thing.

For SWAAY readers, text Swaay to 347-482-0881 for 25 percent off your first order.

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Business

Dear VCs: Making Pledges Won't Close The Funding Gap

Amid the mainstream conversation about inclusion and justice in the workplace, otherwise known as #MeToo, a Silicon Valley venture capital fund considered how they can be more inclusive of the women, minority, and LGBTQ entrepreneurial communities.

Their solution? Ask the CEOs they currently fund to promise to hire senior-level employees from diverse backgrounds.


Lightspeed Venture Partners, a venture capital fund that has investments with blockbuster startups such as The Honest Company, Affirm, and HQ Trivia, has asked its portfolio company CEOs to sign a “side letter" affirming their commitment to consider women and other underrepresented groups for senior jobs and new spots on their board of directors.

Can making pledges— or even hiring a C-Suite level employee to manage diversity efforts— really make an impact on the funding gap for multicultural women-led companies?

Many experts say it's going to take systemic change, not letters of intent.

It is well reported that the amount of investment going to multicultural women-led companies is incongruous to the entrepreneurial landscape and the performance of their businesses. Between 2007 and 2016, there was an increase of 2.8 million companies owned by women of color. Nearly eight out of every 10 new women-owned firms launched since 2007 has been started by a woman of color yet, these businesses receive an abysmal 0.2 percent of all funding. Amanda Johnson and KJ Miller, founders of Mented cosmetics, were just the 15th and 16th Black women in history to raise $1M in the fall of 2017.

The multicultural women who do defeat the odds to get funded receive significantly less than male founders. The average startup founded by a Black woman raises only $36,000 in venture funding, while the average failed startup founded by a White man raises $1.3M before going out of business.

The implicit and explicit bias not only impacts individual multicultural female founders, it could be stifling innovation. For example, companies with above-average diversity on their management teams reported innovation revenue as 45 percent of total revenue compared to just 26 percent of total revenue at companies with below-average management diversity. That means nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years.

In our economy today, venture capital is responsible for funding the work of our most innovative companies. Venture capital-backed U.S. companies include some of the most innovative companies in the world. In 2013, VC-backed companies account for a 42 percent of the R&D spending by U.S. public companies.

With a wealth of multicultural women entrepreneurs and evidence to support the performance of diverse companies, why does this funding gap persist?

According to Kristin Hull, founder of Oakland-based Nia Impact Capital and Nia Community, many traditional investors consider women or minority-led businesses as a category in their portfolio, like gaming tech or consumer packaged good. Hull, who focuses on building portfolios where financial returns and social impact work hand-in-hand, argues gender and ethnicity are not a business category and investors who dedicate a specific percent of their portfolio to diverse companies are the ones missing out.

“We are doing this backwards," says Hull. “Adding diverse, women-run companies actually de-risks an investment portfolio."

Hull points to research that has found women are more likely to seek outside help when a company is headed for trouble and operate businesses with less debt on average. What's more, a study conducted by First Round Capital concluded that founding teams including a woman outperform their all-male peers by 63 percent.

Ximena Hardstock, a 43-year-old immigrant from Chile experienced this bias first hand before she raised $5.1M for her tech startup. “How do you get an investor to notice you and take you seriously?" says Hardstock. “White men from Harvard have a track record and investors are all looking for entrepreneurs that fit the Zuckerberg mold. But a woman from Chile with an accent who started a technology company? There is no track record for that and this is a problem so many women of color face."

Hardstock came to the U.S. from the suburbs of Santiago when she was just 20-years-old. Alone with no family or connections in the U.S., Hardstock worked as a cleaning lady, a bartender, and a nanny before she began teaching and working in education. “I had a lot of ideas and Chile is still a very conservative country," she says. “Most women become housewives but I wanted to do something different. So, I moved to the U.S."

Hardstock went on to earn a Ph.D. in policy studies, served as vice president of Advocacy for National StudentsFirst and worked as a member of Washington DC mayor Adrian Fenty's cabinet. Her experience working in both education and government exposed her to a need to simplify the process of connecting lawmakers with their constituents. As a result, Hardstock founded Phone2Action, a digital advocacy company that enables organizations and individual citizens to connect with policymakers via email, Twitter, Alexa and Facebook using their mobile phones.

Because venture capital and private equity are not necessarily meritocracies, Hardstock initially struggled to get in an audience with the right investors despite her company's growth potential, her experience, and her education. In fact, it wasn't until she won a competition at SXSW in 2015 that she could get an audience with a serious venture capitalist.

While it may seem like symptoms of a bygone era, both Hardstock and Hull say the path to investor relationships is forged in places where many women of diverse backgrounds are not – ivy league organizations, golf courses and late night post-board meeting cocktails attended mostly by White men of means.

The history of venture capital has never been very balanced, according to Aubrey Blanche, global head of diversity at Atlassian software development company and co-founder of Sycamore, an organization aiming to fix the VC funding gap for underrepresented founders. “White and Asian men have built the venture system and for generations have been seeking out people like themselves to invest in."

Personal and professional networks are critical for founders to connect with investors, but many multicultural women don't have access to the networks their White peers have. According to a study conducted by PRRI, the average White person has one friend who is Black, Latino, Asian, mixed race, and other races. This common situation makes getting that all important warm introduction to established VCs very challenging for multicultural women founders.

“Is the ecosystem of your network equivalent to your net worth? Absolutely," says Hardstock. “For us, we have to build our own ecosystem and recreate what happens on the golf courses and at the Harvard reunions."

To Hardstock's point, most multicultural women with entrepreneurial aspirations lack that Ivy League network. According to reporting published in The New York Times, Black students make up just nine percent of the freshmen at Ivy League schools but 15 percent of college-age Americans. This gap has been largely unchanged since 1980.

While notable female investors such as Arlan Hamilton, Joanne Wilson, and Kathryn Finney are actively working to close the funding gap for women of color, only seven percent of current senior investing partners at the top 100 venture firms are women. Less than three percent of VC funds have Black and Latinx investment partners. Without an influential network, Hardstock and entrepreneurs like her are left screaming for a seat at the table.

When Black, Latina, and Asian women founders do get in the room with the right investors, they have to work harder to get the investors to relate to their products and services. “Entrepreneurs solve problems they understand," says Blanche. “When multicultural women entrepreneurs present their businesses to a homogenous group of male investors who may not be equipped to understand the idea, they may pass on an amazing business."

Take, for example, the founders of Haute Hijab or LOLA. Founders of both successful startups would have to explain the market for their services to a table occupied mostly by men who may never have considered that Muslim women want more convenient access to fashion and have never considered women might prefer to purchase organic tampons.

This lack of familiarity typically means reduced funding for women and a host of other consequences.

As one recent study pointed out, even the way investors frame questions to women can impact funding. According to the Harvard Business Review, female founders are often asked “prevention-oriented" questions focused on safety, responsibility, security, and vigilance. Male founders, on the other hand, are often asked questions focused on hopes, achievement, advancement, and ideals.

When all of these factors are considered, a side letter may not be enough to begin to close the funding gap.

Both Blanche and Hull say real change can be made by democratizing information and education on impact investing. Both women say educating investors and MBA candidates about impact investing is the best way to overcome current bias.

Blanche's organization, Sycamore, produces a newsletter for new angel investors who want to help close the funding gap while making money in the process. Hull's firm has an internship program for multicultural girls from Oakland to expose them to the worlds of investing, entrepreneurship, business leadership, and financial literacy.

“I'm excited about the changes I see," says Blanche. “I see more firm employing the Rooney Law on an institutional level, an increase in smaller firms looking at underserved communities, and the democratization of institutional funding."

Hull adds that as long as multi-cultural women-led firms continue to show returns and outperform or perform on par with companies founded by White men, the investor community will rethink their portfolio strategies.


This piece was originally published in 2018.