CONSTRUCTING ALTERNATIVE TERM SHEETS FOR GENDER LENS INVESTMENTS
This is a blog post I co-wrote with Mary Fritz. It was originally posted on the Criterion Institute blog on July 2, 2013. You can read the original post here: http://criterioninstitute.org/womeneffectinvestments/2013/07/02/constructing-alternative-term-sheets-for-gender-lens-investments/
Every six weeks, Criterion convenes a set of people interested in barriers to capital access for early stage, impact, and normal growth companies. Applying a gender lens to these questions reveals the gender dynamics below the surface. Investing with a gender lens means intentionally looking at and analyzing those dynamics, and we believe that using that lens in examining this issue will help us to find new opportunities for women entrepreneurs to access capital.
The April call included participants from Criterion Institute, Village Capital, Upstart Ventures, Cutting Edge Capital, Morgan Stanley, Prime Advocates, the University of Michigan, and the Global Social Benefit Incubator at Santa Clara University. The conversation revolved around this question: Rather than encouraging women to do something different, how can we encourage and equip investors to work with the kind of businesses women are building? In our current system, women have low success rates in attracting equity investments. So how can we restructure available capital to make sense for normal growth businesses?
A clear goal rose from the rich discussion: to create a template for a new kind of term sheet, one that both entrepreneurs and investors will be comfortable with. We want to shift the status quo toward new options that span the spectrum from debt to equity – and beyond. There’s a gap here, and we see that as an opportunity to contribute to a new standard.
So what would it take to get there? In order to think about creating something that’s simple enough to use, flexible, and still tackles all the necessary questions, the group identified the core elements and challenges of a nontraditional term sheet. Our next steps are to think through how emerging investment vehicles, such as blended debt/equity, revenue sharing, demand/dividends, etc., will affect and be affected by questions like conversion, balance sheet positioning, thresholds, caps, governance, and transaction costs.
We’re working on a draft template to discuss and revise with the group. Through this process, we’re identifying success stories and case studies where alternative instruments have been used. The next question will be how to get people to test and use the template. Alternative term sheets are an important step in building the field of gender lens investing. But before tools like alternative term sheets can become wide spread we need to understand where the field is now.
Gender lens investing, what it means to different individuals, groups, and companies, is still being hashed out. There are many who are eager to get involved, but how they want to become involved, what they what to achieve, how they will make it happen need to be better understood. By understanding as many of the moving pieces of the gender lens investing space as possible we can begin to see and what needs to happen in order to continue to build the field. Criterion Institute is playing the facilitator role by engaging as many people and groups as possible to understand this field. In addition to creating alternative term sheets, Criterion is in the early stages of a project to look at the ecosystem as it currently is and what building blocks need to be put in place to get us where we need to be in 10 years. Stay tuned – we’ll keep you updated on our progress!
