The Takeaway: A Q&A With Alexandra Lebenthal on Helping Female Entrepreneurs Navigate the Market
What’s the biggest challenge facing female entrepreneurs and company owners in the current market climate?
While female entrepreneurs always have a higher bar in raising capital, difficult market conditions present yet another challenge. But, women are pragmatic and used to the struggles of raising capital. Many were quick to pivot at the first signs of market turmoil.
Women often approach the investment process thinking they will be lucky to get funding. I always urge them to think the investor is lucky to meet them. By changing that mindset, they walk into the room with more confidence, which can result in a better outcome.
A lot of these early- or mid-stage growth companies raised a lot of capital over the past few years, and they may have to return to the financing markets. How should they be looking at things?
Profitability vs. growth is key right now—capital providers want to see profitability, or at the very least, a clear path to achieve it. Women should be realistic and know that the valuations they saw previously might not be the case today. Rather than facing a down round, raising a bridge round from existing investors may be the best option. If a larger raise is necessary, using an advisor who can help navigate the investor pool and terms can be particularly valuable right now.
Houlihan Lokey does a tremendous amount of work with financial sponsors. How does the world of private equity fit in here?
There is a misunderstanding that private equity is one-size-fits-all. It is important to understand the different types of firms and the opportunities they provide. Private equity not only provides capital, but it can also bring operational expertise and efficiencies that enable the business to meaningfully grow. While the transaction provides the opportunity to realize the fruits of a lifetime of work, if a CEO chooses to roll over some of her equity in the transaction, it may result in a payout that can be quite large, in some cases equaling the proceeds from the original transaction.
There are also sponsors who primarily invest in founder-led companies. Many are actively investing in women-led companies given the statistics on those businesses frequently outperforming others. There is also a growing number of female-led private equity funds actively looking to invest in women-led companies. I expect this trend to continue, especially as venture-backed companies mature and are ready for the next stage of capital.
What’s the most important thing a female company owner needs to know about Houlihan Lokey?
I would say that as they continue to grow, Houlihan Lokey is perfectly positioned, both in our set of services and our mindset and corporate culture, to be that one reliable relationship to assist with any challenge or opportunity—and that we can help develop valuable networks for you. That may be introductions to bankers or investors, including our proprietary network of female-focused sponsors, but also to introduce you to an array of services, from valuation and due diligence to access, to bespoke capital solutions, to liability management capabilities, and so on.
So, what’s The Takeaway?
Amid capital challenges and market shifts, female entrepreneurs’ pragmatism and confidence drive better outcomes, emphasizing profitability over growth, while private equity offers growth opportunities and operational expertise.