After years working in financial services on Wall Street, Loretta McCarthy knew that she wanted to get involved in investing. In particular she wanted to help women entrepreneurs get the capital they needed.
So she got involved with Golden Seeds, an early-stage investment firm that was just starting up with the same goal of funding women-led startups. McCarthy is now the managing partner responsible for Golden Seed’s angel network.
“Entrepreneurship is kind of the heart and soul of the American economy,” McCarthy said. “The large companies we all think about, they all started with angel money and then venture money. They didn't start at the top of the S&P 500. They started with an idea.”
Golden Seeds has now been up and running for 13 years and has invested just over $100 million in new businesses.
McCarthy hears from about 1,000 companies a year. When they walk in the door to pitch there are a few major things McCarthy wants to know.
First, she looks for market size. “For it to become a worthwhile investment for us, we want it to be a pretty big market,” she said.
Then, McCarthy and her fellow investors want to know what makes the business unique. “We always look for something that's differentiating,” McCarthy said. “Is there a problem that they're solving and how are they solving it? Have they done something that hasn't been done before or hasn't been done in quite this way before?”
The team is also important to McCarthy. “At the end of the day the company we invest in is really an investment in the people,” she said. So Golden Seeds looks for teams that make good decisions about how to use money, that know how to hire the right people, and that have the willingness to be flexible and modify their business plan as needed.
The most common mistake McCarthy sees in teams is that they think that the money is just going to come. They often don’t realize how long it’s going to take for the market to catch on and for people to adopt their product.
“We love optimism, we just love realism also,” she said.
McCarthy knows that early stage investing is high risk, so she and Golden Seeds manage that risk by diversifying. “It's not a good idea if you're going to do angel investing to only pick one or two companies and go all in on those,” she said. “It's really a good idea to get to eight or ten companies as soon as you can.”
Another way she looks to manage risk is to dig into who the competition is. “We spend a lot of time studying: Who are the competitors, and can they compete against this company?” McCarthy said.
For women interested in becoming business leaders like herself, McCarthy has a few tips.
- Find your place: “It's really helpful to find an industry that you feel you are intrigued by, because you spend a lot of time at your job,” McCarthy said.
- Get a good team together: “It’s much better to do this work with other people.”
- Work hard: “Be the person that steps up,” she said. “I realized that the people I admired the most and the people who got ahead most rapidly were people who had the ability to really get things done.”
