Women in Private Equity to Know: Lorine Pendleton

January 19, 2018

McGuireWoods has long been an avid supporter of the advancement of professional women. As part of our initiative seeking to expand the leadership of women in private equity, we are kicking off a year-long effort profiling women leaders in private equity. We are hopeful that this series will serve to inspire other women to pursue their careers in private equity in a way that best challenges and motivates them, which these impressive women have all done. We are pleased to kick off the series with Lorine Pendleton of TIGER 21 and Portfolia Funds.

The interview below is part of an ongoing effort by McGuireWoods to profile women leaders in private equity (PE). To read previous profiles, click here. To recommend a woman for a future interview, email [email protected].

Lorine Pendleton, Esq., is the New York chair for TIGER 21 and an investment partner for Portfolia Funds. She is a seasoned business development executive with extensive experience in the legal, technology and entertainment industries. Pendleton is an angel investor in early growth-stage companies.

Q: What attracted you to your present investment focus?

Lorine Pendleton: I had previously worked at several startups, two of which had successful exits, so I knew the startup landscape and what it took to successfully grow a business. I started angel investing after learning less than 1% of all angel and venture capital (VC) funding goes to African-American entrepreneurs. I also learned women did not receive the same level of funding as men. I thought this was abysmal and wanted to do something about it.

Because of my experience at startups, I knew the importance of access to capital to grow and scale a business. I wanted to help change this funding gap by providing capital and working with diverse and/or women entrepreneurs to level the playing field. Fortunately, I discovered a great training program called Pipeline Angels which trains women to become angel investors so more women entrepreneurs get funding. I graduated from that program five years ago and made my first investment upon graduation. To date, Pipeline Angels has graduated over 200 women investors and, through its training program, its members have invested over $4.0 million in 40-plus companies.

Since then I have invested in numerous companies and I’m committed to their success. In addition to financial capital, I have provided social and human capital.

Q: Why is it important for more women to work in investing or be involved in angel investing?

LP: There has been a surge in the number of women-owned businesses in the past two decades. Women-owned businesses now account for 39% of all U.S. businesses, according to a report commissioned by American Express OPEN. Ample studies show women-led companies are on an unequal playing field when it comes to access to capital. Women start businesses with half as much money as men which significantly impacts their growth. It is important to have more women working in VC and as angel investors because this will likely increase the number of women-led companies receiving funding.

I’m happy to say that since I started angel investing five years ago, I have seen a wave of VC firms launched by women and an increase in women angel investors. Women are taking matters into their own hands by starting VC firms and angel groups specifically with a gender investment lens. I believe these efforts will be what it will take to make the funding landscape more equitable for women entrepreneurs.

Q: Why do you actively support providing capital specifically to women entrepreneurs?

LP: I actively support providing capital specifically to women entrepreneurs to close the funding gap that presently exists. Women-owned businesses are one of the economic engines of the U.S. economy — in 2017 they employed 9 million women-owned businesses and generated more than $1.7 trillion in revenues, according to the American Express OPEN report. In fact, if U.S. women business owners formed a country, their country’s gross domestic product (GDP) would be the fifth largest in the world just behind German and ahead of France, the United Kingdom and Italy, according to the National Women’s Business Council. This is remarkable and a testament to why we need to provide equal access to capital to women entrepreneurs.

If the funding gap closes in the United States, it will increase the U.S. GDP by creating more jobs, building wealth for women entrepreneurs and their employees, and increasing innovation which benefits the entire U.S. ecosystem.

Additionally, studies have shown that women-led businesses that are venture-backed  deliver higher returns than all male-led teams, according to First Round Capital and the Kauffman Foundation. As an investor, investing in women-led or women-owned companies increases my likelihood of a return on investment.

Q: Why is it important for more women to pursue entrepreneurship?

LP: It’s important for women to pursue entrepreneurship so they can control their destiny and create wealth. Entrepreneurship is a driver for prosperity, employment, and innovation. Women have a valuable and diverse perspective that can support the overall growth of the economy, if properly funded.

Q: What do you think is the biggest challenge facing women entrepreneurs? What advice would you provide to overcome it?

LP: I think the biggest challenge by far for women entrepreneurs is securing funding to launch and grow their businesses. To overcome this, women must be more resourceful and utilize various funding sources such as equity crowdfunding, pitch competitions, and SBA loans. I think equity crowdfunding is a great fundraising vehicle for the right business. Reg CF (Title III of the Jobs Act) enacted in May 2016 allows small businesses to raise up to $1 million annually from accredited and non-accredited investors. For the first time, all U.S. investors irrespective of income and net worth can invest in small businesses through crowdfunding.

Crowdfunding serves a dual role of fundraising aswell as marketing one’s business to an audience. The success rate for women using crowdfunding as platform to raise money is 87.5% versus 46% for male founders, according to Locavesting. Despite this higher success rate, women-led companies have underutilized this new platform. Women-led companies only represented 3% of the equity crowdfunding offerings.

Q: What advice would you provide to a woman-led company interested in VC or angel investment?

LP: I would advise women-led companies seeking VC or angel investment to evaluate their business. Not all businesses should seek VC or angel investments. If your business is not scalable (as the number of customers increase, your cost per customer decreases) and is more of a lifestyle business, it will likely not be investable to a VC or angel investor. There are a number of other funding sources for lifestyle businesses, such as crowdfunding and loans.

However, if a business is scalable, then VC firms and angel investors will evaluate whether your business is investable by looking at a number of factors: 1) Does your product or service solve a problem and is your solution faster, cheaper, and smarter than your competitors? 2) Can your team can execute your idea successfully because they have industry domain, work history, networking ability, and skills? 3) Is the addressable market for your product or service large enough to develop a viable and scalable business? 4) Do you have a solid business and financial model? 5) Do you have a clear strategy for cashing out your business? This final factor is very important to investors as this is the only way investors will get a return on their investment.

To contact Pendleton, email [email protected].

For more information on these and other programs, visit our events section or contact Mary Light at [email protected].