In an industry with some rather recognizable names and star power, it's easy (or lazy) for startups to skip over what else is happening in venture. However digging deeper and spending more time researching is where founders will truly find venture gold. To help you out, here are six U.S. based women in venture to not only watch but to strategically find ways to add to your network. I stress the word “strategically”. Each of these women has networked or leveraged their existing networks in the pursuit of their careers in venture, so they have clear opinions on how entrepreneurs can effectively connect with investors (and the ways that should definitely be avoided). Take their advice to heart if seeking venture investment is the right path for your start-up.
Proptech is powerful; its mission is to fuse the digital world with the built environment to create a competitive edge.
The interest in proptech was seen earlier this month, when US data giant CoStar bought Realla, a two-year-old, UK-based start-up offering a free-to-list search engine for commercial property.
CoStar is placing a bet that commercial property will follow the market for homes and move to online portals, like the market has done in the US. The pickings stand to be rich, especially with a proposed expansion across Europe.
US$12bn of funding for proptech companies in 2017
Last year, proptech globally saw venture capital investment triple to US$12.6bn, compared with US$4.2bn in 2016. A large slice of the 2017 pie came from SoftBank’s investments in Compass and WeWork (source: The Real Deal).
Constance Freedman, Founder & Managing Partner of Chicago-based Moderne Ventures, an ‘early stage’ venture fund, believes that this figure is in reality “significantly higher”. This, she says, is because it does not include ‘horizontal applications’: for example, DocuSign’s US$4bn initial public offering, which clearly has applications in and outside of the real estate sector; Perq – AI for creating lead generation; and platforms such as Envoy – all of which are not considered ‘true’ proptech. Global Real Estate Expert had the opportunity to ask Constance Freedman about how she sees the ability of proptech to create ‘durable growth’ in the real estate sector.
How can proptech help in ‘Engaging the Future’ over the next 30 years?
Over the next 30 years, technology will provide the tools to help the real estate industry to not only build faster and at a reduced cost – with no compromise on standards, but also with less waste and use of resources.
The industry is also evolving to act as an enabler in a way that has never been possible before; helping to link the creation of long-term economic growth with quality of life and optimal use of resources. This will have a tremendous impact for the industry and for its customers.
“As customers look for economic return, community cohesion and sustainable performance where they work, live, shop, and play, they are helping to push the industry and its technology partners to find ways to solve these issues.”
Technology is in a position to spearhead alternate means to address many of the current issues in real estate, from the way the digital economy has changed how end users view their physical space requirements to the massive shortage of affordable homes.
Many times, customer behaviour dictates industry change. As customers – whether real estate companies, owners, operators, investors or consumers – look for economic return, community cohesion and sustainable performance, where they work, live, shop, and play, they are helping to push the industry and its technology partners to find ways to solve these issues.
To what extent is the real estate industry being challenged by ‘disruption’?
For most of the last century innovation was brought to us by a few large, incumbent technology players, and at the pace they decided.
Outside capital is now allowing into the market smaller, more nimble entrants, who do not have the same constraints as the big players.
“Disruption isn’t always happening to the real estate sector; it is also happening for the real estate sector.”
We need to remember that disruption isn’t always happening to the real estate sector; it is also happening for the real estate sector.
Take the example of DocuSign; ‘DocuSign’ is now a verb in the real estate space. Or digital mortgage companies such as Better and insurance companies such as Hippo in the US housing sector, which can decrease transaction times by as much as 30 days.
On the multi-family residential side, we see companies in the US such as LeaseLock and Nova Credit allowing property managers and owners provide housing to people who might not otherwise qualify for an apartment, with no additional risk to the property.
These are all disruptive technologies creating enormous value for all players in the industry.
Many proptech firms will fail. How do you spot the survivors who will go on to have a radical impact?
Our Moderne Network has around 700 members, all investors, mentors or advisers, corporations and executives, looking for technology and innovation to create a competitive advantage.
We work closely with our Network to assess and then to spot the tech companies who they believe will have a radical impact on the industry; they look to understand the tech companies’ true value in their execution abilities and operational attributes.
How is proptech bridging the gap between the different players in the real estate industry?
Technology has enabled multiple constituents in the value chain or transaction process to share data and information quickly and often in real time.
In the past, data was siloed internally within companies and there was minimal transparency to the customer about a transaction.
“Technology has allowed integrated data flow to and from internal systems, which in turn creates operational efficiencies, as well as enhancing and increasing the speed of financial decisions.”
In the housing sector in the US, online search portals such as HomeSnap and tech companies connecting consumers with on-demand and local services, such as Hello Alfred, are providing greater transparency and better communication in a way that has never been conceivable before.
Technology has allowed integrated data flow to and from internal systems, which in turn creates operational efficiencies, as well as enhancing and increasing the speed of financial decisions.
Is the proptech industry doing enough to protect its customers from cyberattacks?
As we speak to companies and industry partners, the threat of cyberattacks is becoming a greater concern, especially in the IoT (Internet of Things) sector where an exponential rise is predicted in the number of connected devices on the internet.
Many new digital technologies are still vey nascent, so the true cyber threats are unknown. IoT devices will be installed inside a home or workspace, and connected to other connected devices, leaving multiple entry points for attack.
“All parties need to be involved in accessing any vulnerable systems and co-designing the necessary steps to safeguard the system.”
With so many links in the chain, it is hard to pinpoint who is responsible for safeguarding against any potential attack or breach. That is why all parties need to be involved in accessing any vulnerable systems and co-designing the necessary steps to safeguard them.
How did association get in so early? It did a small investment and an exclusive partnership with DocuSign to offer its software for digital signatures to member Realtors, according to securities filings. It's quite a home run for Constance Freedman, founder of Chicago venture fund Moderne Ventures.
Listed originally in Crains
Women in Chicago's venture-capital industry back in 1989 didn't have much opportunity for networking, even when they traveled to Washington for the National Venture Capital Association's annual conference. After spotting the few women from other cities, they went out for dinner; the reservation was for fewer than 10, recalls industry pioneer Ellen Carnahan, who at the time was at William Blair Capital Partners in Chicago.
That gathering became a ritual that lasted nearly a decade, but the numbers didn't expand much. In the past five years, however, they have. "The pool is much bigger now," she says, pointing to her younger peer Gale Bowman at IrishAngels, who regularly assembles nearly 50 women just in Chicago.
Women are still underrepresented in venture capital, both in Chicago and nationally, with just one woman in a senior post for every four men. But a new generation of women is gaining traction working alongside men and launching their own venture firms and small funds.
As they seek to raise larger subsequent funds, women's new track record of investment returns will be scrutinized closely. "The proof is in the pudding, and the proof takes 15 to 17 years," says Maura O'Hara, the longtime executive director of the Illinois Venture Capital Association
Pensions, foundations, family investment offices and other institutional investors had $368 billion of value, both cash and assets, with U.S. venture-capital firms, as of the end of June, according to Seattle research firm Pitchbook. The firms, in turn, invest in startups and hope for big returns. They employed about 335 women in senior investment jobs, versus 1,239 men in those roles, such as CEO, chief investment officer and managing partner, Pitchbook says.
Chicago isn't a huge hub for venture funds, but it's the center of activity for Illinois. IVCA's in-state venture-capital members (a few are outside the state) have about $10 billion under management. Of IVCA's 34 active venture member firms, only three are mainly led by women. Pitchbook doesn't parse the data by region, and the IVCA doesn't have any headcount figures.
In Carnahan's era, some of the city's biggest companies gave women a boost in the industry. In her 20-year career at Blair, she became head of technology investing before co-founding Seyen Capital in 2006. Her industry pal Donna Williamson was a vice president at Baxter International from 1983 to 1992, with purview of emerging companies, before parlaying that experience into a managing director post at ABN Amro overseeing private-equity investments in health care.
Northbrook-based insurer Allstate hired a cadre of women as investment professionals in its venture-capital arm, including Sona Wang, who left with colleagues Len Batterson and Don Johnson to form Batterson Johnson & Wang in 1987, where they invested in high-tech startups. "They were just open to diversity, so that's probably what really drove it," Batterson says of Allstate.
Wang, a Korean immigrant and one of Chicago's accomplished women in the field, left the firm in the mid-1990s to join other partners in founding Inroads Capital Partners, which focused on investing in female and minority entrepreneurs. Later, she teamed with Williamson and another woman to found Ceres Venture Fund. While Wang is optimistic about the future, including for her daughter now interning at Chicago accelerator Techstars, she says it's hard to point to "significant progress." "Highly qualified women . . . are still finding their way," she says.
Both the annual Washington dinner that Carnahan instituted for the NVCA and a local women's committee of the IVCA she started there as chairman in 2009 died off. O'Hara says the IVCA women's group was dissolved to bolster national women's groups, such as the Women's Association of Venture and Equity, and avoid duplication of effort. "If those efforts fade, we will pick it back up," she says.
A FOCUS ON NETWORKING
Wave's Midwest chapter picked up the ball in 2013 to bring together women who invest in privately held companies, including venture investing and private-equity investing in more mature companies. Women have struggled to get a toehold in both.
Wave meets a few times a year and hosts a popular annual golf scramble event, but Bowman wanted to create a group focused on venture, so she launched Chicago Women in VC in 2016. It welcomes women who touch any aspect of venture capital, from investing to marketing. It, too, is focused on networking, with cocktail hours and other social events. "The real hope is that we'll do more investing together because we're meeting on a regular basis," says Bowman, who is managing director at IrishAngels, an organization that invests about $7 million annually, mainly in businesses with a University of Notre Dame connection.
One woman in her new directory is Jessica Droste Yagan, who, along with Tasha Seitz, has been a top partner at Chicago venture investing firm Impact Engine since 2014. Yagan says that drawing more women into the process makes for smarter investing. "Having one kind of person making investment decisions is limiting," she says.
Some companies propelling women into leadership roles appear to agree. Futures exchange operator CME Group promoted Rumi Morales to head its ventures unit in 2013, and Kim Trautmann took over the venture unit at trading company DRW Holdings in 2016. Other women on the rise include Dana Wright, who was hired as a managing director at Math Venture Partners in October, and Momei Qu, a vice president who left Baird Capital in February for Penny Pritzker's PSP Capital Partners. "There is a movement of far more women getting involved," says Nancy Sullivan, who became CEO of Illinois Ventures in 2013.
'KEEP HANGING IN THERE'
Women today are taking another stab at starting their own funds. Constance Freedman, who founded Moderne Ventures, raised that firm's first $33 million fund in 2015. She got her start at Boston fund Cue Ball Capital and eventually moved to Chicago, where she led Second Century Ventures' $20 million fund for the National Association of Realtors. Now she's on the cusp of raising another fund next year.
Chicago's profile in venture has grown significantly, but the presence of women hasn't kept pace, Freedman says. It's a "network business," and people invest in people they know, she says. Until the playing field is leveled, there will be more funding for men than for women, she adds.
Gerri Kahnweiler and Cayla Weisberg also launched their own Chicago firm, InvestHer Ventures, in 2016 to invest in startups with at least one female equity partner. Morales, who left CME Group last year, is also angling to launch a fund.
Carnahan remains an investor in nine venture-capital funds through her Machrie Enterprises. For her, funds must have female investment professionals. "The more you can source from different networks, the better the deal flow you're going to have," she says. "It takes seven to 10 years to get a track record. You have to be patient and keep hanging in there."
That's key advice for anyone investing in startups, but perhaps especially for women forging a new place in the venture arena.