Tackling Investors’ Fear of Backing Married Co-Founders
Is it mere superstition that could be holding back thriving businesses?
Making the big step of starting a business is a decision that can be both exciting and intimidating. The intimidation comes from all the challenges and potential pitfalls that could see your startup becoming one of the over 50% that fail within the first four years.
But having someone by your side can help to keep you feeling confident and remain positive about your prospects, even in the face of immense difficulties. I have firsthand knowledge of this, having co-founded Tunedly with my partner in crime, so to speak.
Along the way, we’ve learned a lot, such as how to connect with investors. And while we have been reasonably successful, there are a few experiences in this area that have left us just a little befuddled. One that has bugged me, in particular, is the reluctance of some angel investors to back startups that are owned by married couples. Yes, you read that right.
Marriage is considered an honorable institution, at least in the western world, and wedded couples are supposed to be privy to a number of perks that their unwedded counterparts are not. In addition, statistics from the Center of American Progress (CAP) indicate that families with married couples are in better positions to run successful households (based on a Supplemental Poverty Measure of $38,000 per family of four) than those headed by single parents. And even the George W. Bush administration pushed a marriage program back in 2006 that sought to bolster the ideal that getting married was a way out of poverty (although that didn’t fare so well, but that’s another story).
In light of all that, we thought that was the case for the business world as well — marriage being seen as a good thing — but we have since realized that there are misconceptions among many who have the moolah that is sought after by startup founders like us.
What’s the deal?
Finding investors who were willing to buy into our vision became a high priority for us once we recognized the potential of Tunedly and where we wanted to go with it. But Chris and I knew it would be difficult and so, we prepared. After all, investors not only want to know that you have a solid idea; they also want to know there will be a return on their investment.
With that in mind, we prepared pitches and presentations, like any entrepreneur with a burning desire would, as well as invested time and energy into traveling to various cities to meet potential investors. We knew that once we were able to show enough venture capitalists that we had a real business idea and just how it would benefit them in the long run, we would have a good shot of getting the funding we needed.
Now, we have had some good experiences, some not so good. But imagine your marital status turning out to be the deciding factor for whether you receive financial support or not. The thought process behind this is that the investor’s job is to find ways to mitigate risks, and one of the possible risks, apparently, is the potential problems that could come with a divorce. Considering the scrutiny and the feedback we received, it would seem that the motto of a number of VCs is “don’t invest in a married team.”
Is the cautious approach warranted?
On the surface, it would seem that VCs who are hesitant about supporting married power couples are just being insightful. After all, there have been many high profile divorces that got pretty messy, especially as they played out in the media. The last thing an investor needs is for his or her investment to be tied up in alimony and other post-matrimonial claims.
Fair enough, and VCs are free to support who they see fit by the way. I would never imply that they are obligated to funding startups owned by couples as compared to, say, those owned by single or unattached founders. I’m simply saying that the reluctance to support married couples in business seems unfounded and biased.
In fact, recent developments in one of the hotspots for finding investors have raised questions that could be linked to the mindset. I’m specifically talking about the sexual harassment furor that erupted in mid-2017 and is still smoldering in the Silicon Valley area.
If you haven’t been keeping up with the news, the California tech community turned into a hot mess after several executives were called out for a high level of sexual harassment incidents, especially against female entrepreneurs. So far, a number of high profile investors have resigned over the allegations and a few have apologized for their actions.
Numerous women have since come forward with claims that they were touched, propositioned, or otherwise made to feel uncomfortable by investors. Note that the vast majority of executives operating in Silicon Valley, and overall for that matter, happens to be males who have a lot of financial clout.
It is possible then that by funding startups led by married couple, it ensures the culture of the company encourages gender equality, which is another story altogether, but which could lessen the likelihood of scandals going forward.
Overall, I think it might be less of a worry for investors to put capital behind the startups of married couples than those of friends/partners or individual owners.
I am not here saying that investors generally have an ulterior motive with whom they choose to provide funding to. In fact, I believe many of them are only interested in the ROI following their decisions. Plus, we have met a few incredibly investors on our journey. Otherwise, we would not be where we are at right now.
However, I am not all alone with the view that married co-founders have an unfair bias against them when it comes on to securing funding from VCs. Will Bunker, Founder of GrowthX Capital also made mention of this in an article. He noted that, “I think this is an unfair bias. You spend so much time with your co-founders that you have a relationship risk with any multi-founder team. A co-founder that is a significant other doesn’t really increase this risk. The real question is: how well do the co-founders get along and align on long term vision.”
Chris and I have been thinking about other possible arguments put forward by investors as to why they might be hesitant in supporting married co-founders. By the way, there are a number of successful startups that are headed by married couples. These include CISCO, SlideShare, Eventbrite, Canva, and a host of others.
This fact is not unique to the Western world either. In the MENA region, married co-founders are trending in business circles, at the same time helping to bolster the statistic that 35% of women account for all startups (founded or co-founded) in this area of the world.
Here’s why we think investors should not be fearful in supporting couples who happen to be co-founders:
The relationships (professional and otherwise) of couples are actually more stable than, say, two friends or buddies, or even random associates, coming together to start a business. Relationship stability is important in the running of any business. Any kind of animosity or strained relations can easily send a company crashing. And while being co-founders (couples or otherwise) is similar to a marriage, acquaintances and friends have less time to develop strong and stable relationships.
A lot more is often at stake with married couples too, which is an incentive of itself to married co-founders. On the other hand, unattached co-founders have little to no obligation to each other, so it’s less of a hard decision to split if things get rough.
- Shared vision and focus
Creating a company together means that couples are usually in tune with each other’s visions for the company (even if they don’t always agree) and are focused on doing what it takes for success, especially in the early days when working hard to spark sales and increase revenues. This means they will be more committed to going the extra mile; after all, it’s their baby, so to speak.
Random co-founders coming together, especially if they are already wealthy, are highly likely to bring their own ideals, egos, etc. to the table.
- Less likelihood of scandals
Married couples are (supposed to be) working on keeping each other happy in the relationship, even while maintaining professionalism in the workplace. This is a challenge in itself and if they remain committed to making it work, the chances of scandals happening are virtually nil.
In light of all that has been covered in this article, I believe the assertion that investing in married co-founders is higher in risk than providing funding for single, unmarried or non-related partners, is baseless. What do you think?