Seda Goff: Why Women Veteran Startups Are The Next Big Thing In Entrepreneurship (and How We Support Them)
Stacey Sikes and Kevin Hesselbirg of Hofstra University discuss the $100,000 competition for veterans who plan to start their own business.
Women represent 10 percent of the veteran population in the U.S. But own one in six veteran-owned businesses. Their businesses generate over $17 billion a year, and the growth of women veterans’ startups has been “higher than any other segment of the entrepreneurship economy,” according to Carla Harris, chair of the National Women's Business Council.
But only two of the companies on Forbes’ Top 25 Veteran Startups have women veteran founders (both co-founded with male business partners). What’s more, women entrepreneurs receive a staggeringly low 2 percent of all capital investment and only 4.4 percent of total dollars in small business loans. Many women veterans are starting their own businesses with just their personal savings.
STEPHEN MOORE: DON’T BELIEVE BIDEN, BERNIE, BUTTIGIEG OR OTHERS – AMERICA'S MIDDLE CLASS NEVER HAD IT SO GOOD
Women veteran-owned startups are not just underrated and underfunded – they’re actually among the best investments.
U.S. Military service members get some of the best entrepreneurial training in the world. Military men and women learn resilience, grit and an unwavering work ethic.
First-class training facilities and high-stakes combat environments instill in them a mindset of quick thinking and innovative problem-solving. These are some of the reasons veteran entrepreneurs, both men and women, tend to out-earn non-veteran entrepreneurs.
As the director of veteran entrepreneurship for PenFed Credit Union and a former leader at Bunker Labs DC, I’ve seen veteran entrepreneurs employ these skills to make successful businesses.
FOX BUSINESS ANCHORS AND REPORTERS GO TO THE MOVIES FOR NEW YEAR'S
Consider this: Companies founded by women deliver more twice as much revenue per dollar invested than those founded by men. Women entrepreneurs create more jobs and hire more workers than their male peers. And women-owned businesses that generated revenues of over $1 million increased nearly 50 percent over the past decade, compared to 12 percent of all U.S. Businesses.
Women veteran entrepreneurs don’t lack the skillsets, training or ability. Many of them just lack capital. That’s why PenFed created the Women Veteran Fund as part of our Veteran Entrepreneur Investment Program (VEIP) – to bridge the gap in funding and female representation in the investment process.
The recipient of our first investment, Air Force veteran Suzie Mills, started a yoga studio in her basement in 2013.
Today, Honest Soul Yoga has three studios in Virginia and is expanding to Washington, D.C., Florida and Texas. With the majority of her yoga students being service members or spouses, she’s promoting strong physical and mental health in military communities. And she’s helping combat the high unemployment rate among military spouses by hiring military or military spouses for over half her staff.
Mills is not alone in her hiring practices; in fact, veterans are 30 percent more likely to hire other veterans and spouses than their non-veteran counterparts. This is why investment in veteran businesses is so important. An investment in just one business has a ripple effect across multiple families and future generations.
Here’s what we need to support and scale women veteran startups:
More investor confidence in women:
A 2018 study by BCG found that “women founders and their [investment] presentations are subject to challenges and pushback… often, investors simply presume that the women founders don’t have [the basic technical] knowledge.” Additionally, many male investors “have little familiarity with the products and services that women-founded businesses market to other women.”
Larger loan approvals for veteran businesses:
Veteran business owners submit more loan applications and reach out to a wider variety of lenders, but they usually obtain less financing and get lower approval rates. We need more lender confidence in both male and female veteran entrepreneurs.
CLICK HERE TO GET FOX BUSINESS ON THE GO
More women mentorships:
Women tend to be more conservative than men and ask for less money. In my experience, I’ve found that women veterans often make the mistake of trying to perfect their business before pitching. We need more mentors and coaches for women veteran entrepreneurs who have venture capital experience and will encourage them to pitch earlier and make bigger asks.
Broader support networks:
As an entrepreneur myself, I know that it can get lonely sometimes, and the lack of a predictable paycheck can be scary. Entrepreneurs tend to internalize their worries, and many experience high levels of anxiety. Support networks, through programs like VEIP, that connect entrepreneurs with mentors, advisors and other entrepreneurs who can help them navigate the psychological aspects of entrepreneurship, are critical.
My father was in the Turkish navy and worked for the U.S. Navy for almost 30 years after he came to America. I grew up with a firsthand sense of gratitude for our armed forces and the sacrifices their jobs require.
But we shouldn’t invest in veterans simply because we are grateful. We should invest in them because both female and male veterans have proven their ability to create successful and long-lasting businesses. Women veteran entrepreneurs in particular are poised to be the next big thing in business. Getting involved in the early stages could be the smartest investment move you make this year.
Seda Goff is director of veteran entrepreneurship for PenFed Credit Union and the PenFed Foundation.
CLICK HERE TO READ MORE ON FOX BUSINESS
Silicon Valley's 'startup Guru' Told Us There Are 5 Types Of Entrepreneurs. Here's How To Know Which Kind You Are.
Entrepreneurs are everywhere.
They come from all walks of life, and sometimes it can seem as though everyone is calling themselves an entrepreneur.
Serial entrepreneur and startup guru Steve Blank says all entrepreneurs have four things in common: they're resilient, agile, tenacious, and passionate.
Blank is a Silicon Valley legend who has over 40 years' experience on the subject. He has launched eight companies (most notably E.Piphany, which developed customer-relationship-management software) and written four books, including "The Four Steps to the Epiphany" and "The Startup Owner's Manual."
Ten years ago, he popularized and codified the Lean Startup methodology, which changed how the business world thought about startups, and he has mentored countless founders as an investor and advisor.
"The big insight was that startups aren't just small versions of large companies," he told Business Insider in an interview. "Large companies execute a known business model."
"The Lean Startup was the first tool to search for business models," he added.
Today, Blank teaches those tools to undergraduate and graduate students at Stanford, UC Berkeley, Columbia, and NYU, and he says his approach is useful to any founder, whether they're starting a local business or the next tech unicorn.
Business Insider spoke with Blank about what it takes to be an entrepreneur, and he said that while they have a lot in common, they tend to fall into five basic categories: lifestyle, Main Street, venture startup, corporate, and social.
Here's how to know which one (or more) of the categories applies to you, based on your personal risks and financial goals.
Lifestyle or solo-preneur
Dominick Reuter / Business Insider
Risk: Low to moderate
Goal: Flexible work-life balance
Example: Three friends used the barrel pictured above to start Night Shift brewing in their apartment as a hobby. Now their capacity is capacity is up to 120-barrels.
If you started monetizing a hobby or side hustle to support a personal passion, then this is you.
Lifestyle entrepreneurs weren't included in Blank's original framework, but the changing relationship to work has given new shape to this group of business owners who work for themselves.
Blank used the example of someone who loves to surf, and offers surfing lessons in order to fund that lifestyle. The business here is low to moderate risk, and serves to meet flexible financial goals.
Lifestyle entrepreneurs are using online tools and platforms like Poshmark, Instagram, Etsy, Amazon, Venmo, and Square to start businesses to generate additional income at much smaller scale and at lower risk than previously possible. Some even go on to grow their operation into a more formal business.
Main Street
Dominick Reuter/AFP/Getty Images
Risk: High
Goal: Earn a living
Example: Patrice Banks experienced unfair treatment at other auto garages, so she started a women-focused shop of her own.
If you are an employer operating a business like a restaurant, shop, or other services we rely on every day, then this is you.
Main Street entrepreneurship is where most small business owners find themselves. Blank says his parents were just this type of entrepreneur, and that these businesses undertake a high level of personal risk in order to feed their families and support their communities.
The range of business types represented in this category is extremely broad, and their growth targets generally mean the owner has to personally assume most of the risk.
At Business Insider, we commonly refer to them as "bootstrappers," as they must rely on their own savings or credit to finance and grow their businesses.
This traditionally brick-and-mortar set of businesses are increasingly using digital channels to meet their needs, from online marketplaces to social media.
Venture startup
Courtesy Faire
Risk: High
Goal: Get big, get rich
Example: 4 former Square employees landed a $1 billion valuation for their marketplace platform that connects independent designers with local shops.
If you are a founder who is looking to get big — and do it fast — then this is you.
Rapid growth is the name of the game for these entrepreneurs, and the emphasis here is on a business model that can grow quickly.
The central challenge is to find untapped areas of high demand, and develop the products or services to capitalize on it, rather than a particular attachment to a specific product or service. Here's where Blank's Lean Startup methodology of concepts like pivoting and minimum viable products pack the most punch.
These entrepreneurs have grand visions that involve high risk and require a lot of money to achieve — more than can be obtained on their own — so they turn to venture capital investors.
In exchange for financing, VCs get a share of the company's equity ownership and certain oversight privileges in the direction of the business.
The ultimate goal for most of these startups is to reach the public market or get acquired by a larger company. For some founders, that is their cue to exit the company with a big payday and move on to start the process all over again with a new idea.
Corporate intrapreneur
Cruise
Risk: Low
Goal: Develop new division, get promoted
Example: Hussein Mehanna, the head of AI and machine learning at the self-driving-car company Cruise, was formerly director of engineering at Facebook.
Even if you work at a large company, you may still be an entrepreneur — or as some call it "intrapreneur."
Big businesses need new ideas to keep growing, and it's up to their forward-thinking employees to find those opportunities.
Corporate entrepreneurs face many of the same challenges as their independent counterparts do: finding a market, getting financial support, and building a team.
Developing those skills in a lower risk environment has helped some of the individuals behind these corporate initiatives go on to start their own companies.
From the days of IBM's Skunk Works to KPMG's new Innovation Labs, companies from a wide range of industries are taking a cue from startup the startup world.
In fact, large organizations have become some of Blank's most fervent Lean Startup supporters, and even the US government is using his curriculum to train teams on how to bring an entrepreneurial mindset into the development of new products and services into existing organizations.
Social impact
Alannah Patterson
Risk: Moderate
Goal: Change society, change the world
Example: Taran Ghatrora and Bunny Ghatrora founded Blume with the goal of changing the narrative around puberty and sex education.
Maximizing profits is just one of several potential business objectives. If having a social impact is more important to you than financial rewards, then this category is for you.
Blank often says that there are roughly five to 10 numbers that really matter for any business, and most companies would put profit close to the top of the list.
But for those who are looking beyond the bottom line, the skills and approaches that are often used to generate revenues can be readily applied to tackling other challenges.
That doesn't mean you completely eschew money — that's still extremely important to sustaining the operation — it just means that something else matters more.
The concept of social entrepreneurship has traveled a long way over the past several years, and now has growing academic and institutional support.
Harvard Business School has a dedicated institute for social enterprise, and large companies are getting serious about ESG (environmental, social, and governance) initiatives.
Small Business: How Will The SECURE Act Affect You?
New legislation aimed at incentivizing small businesses to offer retirement plans was signed into law this past December.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act comes with a host of provisions including increasing the amount of tax credits companies can claim for setting up a plan. It also allows unrelated small employers to participate collectively in open Multiple Employer Plans (MEPs), helping to reduce the administrative costs and duties of each individual employer.
But even with these allowances, it’s too early to tell whether it will spur more small employers to offer retirement plans, say experts.
“It’s a big law and it has a lot of provisions,” says John Scott, director of The Pew Charitable Trusts Retirement Savings Project, which studies the challenges and opportunities for increasing retirement savings. “Whether it will have a big social impact is not clear yet.”
There’s going to be a “big education process” around the recently passed legislation, he says.
Kenneth C. Anna, a partner at STEINBERGANNA Wealth Management in Huntington, agrees, noting “most people don’t know anything about this.”
Even people within the industry have to go through an education process, he says.
“The financial community is still getting educated on what this means … and the next step is to educate companies,” he says.
Get the Biz Briefing newsletter!
The latest LI business news in your inbox Monday through Friday.
By clicking Sign up, you agree to our privacy policy.
There will also be education needed on the consumer side considering it includes such provisions as removing the age cap (previously 70 ½) for contributing to traditional IRA’s; allowing eligible, long-term part-time workers to participate in 401(k) plans; and increasing the age at which people have to start taking minimum withdrawals from their retirement accounts from 70 ½ to 72, says Anna.
Overall, these are all “positives” for the individual, says Steven Brett, president of Marcum Financial Services, LLC in Melville, which assists companies in managing their retirement plans.
On the employer side, further guidance needs to be issued on one of the law’s key provisions regarding MEPs, which would allow unrelated businesses to join a single shared plan to reduce costs and help negotiate better fees, says Scott. Previously, employers had to share common organizational traits to be in an MEP, like be in the same industry, etc., he says.
The U.S. Department of Labor needs to issue guidance regarding the SECURE Act’s MEP provision, he says, noting MEP provisions take effect January 2021. The DOL didn’t respond to Newsday queries asking for further timeline details.
Beyond MEPs, another benefit to small businesses (those with 100 or fewer employees) is the tax credit for startup costs incurred for setting up a plan has increased from up to $500 annually to up to $5,000 for the first three years the plan’s in effect. There’s also an additional credit of up to $500 annually for three years for plans that include auto-enrollment, says Brett.
The startup credit “can provide significant savings to help small businesses set up and administer a plan on an annual basis, certainly for the first three years,” he says.
Charles Massimo, CEO of CJM Wealth Management in Deer Park, an investment advisory firm, says even with the credit, he’s not convinced this legislation will create more retirement options long-term.
“If companies are focusing just on the tax credit and ignoring all the other parts of what makes an effective plan, it will fail,” he says, noting employers have to prioritize educating employees about their plans and why they should participate. “Employers will not continue paying for a plan that no one participates in.”
One downside to the law, he says, is the elimination of the stretch IRA option, which allowed non-spouse beneficiaries of inherited retirement accounts to stretch required minimum distributions over their lifetime. Now the money must be withdrawn out of those accounts within 10 years, which poses a greater tax burden, says Massimo.
But Phil Waldeck, CEO of Newark-based Prudential Workplace Solutions Group, a business unit of Prudential Financial, feels like the benefits of the law outweighs that.
“Most Americans don’t know what a stretch IRA is,” he says. “But most Americans know what a 401(k) is.”
He says the effects of the SECURE Act won’t be immediate, noting, “I think this is the kind of thing that develops over time.”
Still it offers solutions to two big hurdles of starting plans, which are cost and complexity, says Waldeck, referring to elements like the tax credit and MEP provision.
Asked if Prudential will enter the MEP market, Waldeck stated: “We are a leader in the [financial services] market and we will likely participate in some manner.”
Fast Fact:
Small businesses are less likely to offer a retirement plan than their larger counterparts. According to a 2018 survey by the U.S. Bureau of Labor Statistics, approximately 85% of workers at private-sector establishments with 100 or more workers were offered a retirement plan. In contrast, only 53% of workers at private-sector establishments with fewer than 100 workers had access to such plans.
By Jamie Herzlich
Comments
Post a Comment