March 8, 2013

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Recently, social enterprise aficionado, Kerri Murphy, took the time to listen in on a call about a gender lens on alternative term sheets. Kerri works with us on a Gender Lens Investing Ecosystem Analysis project most of the time, but she had an interest in this conversation and took the time to reflect on what she heard. Check out her latest blog to learn about the emerging conversation that Criterion, Village Capital, Invested Development, and others are having about how alternative term sheets might just be a game changer for many women entrepreneurs

Alternative Term Sheets As a Game Changer

By: Kerri Murphy

Part of the current portfolio of projects being worked on by the Criterion Institute is the initiative to build the field of Gender Lens Investing. The goal is to build a sustainable Gender Lens Investing field, creating durable and systemic change for women worldwide – both as investors and beneficiaries of invested capital.

I was lucky enough to be invited to join a phone call earlier this month hosted by the Criterion Institute focused on how to incorporate gender into alternative term sheets and therefore help female entrepreneurs and companies that benefit women access capital. Term sheets are short documents listing the agreements between investors and entrepreneurs on conditions for financing a company.

I was able to listen in to a call with several experts in varying areas such as angel investing, consulting, and social enterprise. Since the conversation around gender and alternative term sheets is still in the very early stages, there was a great deal of time spent talking about what is and is not going on within the field. Alternative term sheets are new and often untested. There is hesitation all around on the parts of investors, entrepreneurs, and lawyers. However, everyone on the call was eager and excited to find ways to bring alternative term sheets to traditional markets. So, how can gender be incorporated into term sheets? This is a huge question and not an easy one to answer. The group decided to break it down into more manageable and actionable questions to get the conversation started.

This brings us to the first of several important questions: How can we engage attorneys in this conversation to make them more comfortable with alternative term sheets, especially when it comes to gender? Being able to successfully engage the legal profession in this convestion is critical since it plays such a critical role in the agreements that follow term sheets. Attorneys are known for being conservative so one action item is to think about ways to engage them in this conversation and increase their comfort level.

Next, it’s important for entrepreneurs to understand the different types of investments that can be made in their companies. Since this is a complex issue and can be difficult to understand for those that have no formal education on the issue, there was talk of creating a resource that would explain different types of investment vehicles and the types of companies and growth each is most appropriate for. It currently appears that there is no such resource, but developing one would create an important tool to help entrepreneurs and new investors get clear on the paths available to them and determine which of those they should be on. So how do we go about creating this resource?

Finally, we talked about how to get investors comfortable using the term sheets everyone on the call is so eager to see put into place. So how can this be done? Currently, there is at least one “case study” in development where a group of women entrepreneurs will take place in an accelerator program that will use alternative term sheets. Hopefully, there will be other case studies to follow to help build the field and demonstrate to others the power of these practices, which will forward the goal of putting the great conversations around gender lense investing into practice and continue the movement.

While these calls are still in the very early stages, there were so many promising and exciting ideas discussed. It’s exciting to know that they are happening. These early conversations are just scraping the surface, but with time it’s clear that gender lens investing will be mainstream. Stay tuned.

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