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venture capital

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The Secret is Out: Transparency is In

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Last fall, Kellogg’s acquired a protein bar startup called RXBAR for $600M dollars. The significance of that deal is twofold. First is the story behind the company: two childhood friends built the business out of their kitchen with $5,000 each and no outside funding. Second, their brand was built on transparency and candor: each bar neatly lists a handful of ingredients on the front packaging followed by their signature motto: “No B.S.”

The market took notice.

In an era where food labels list hard-to-pronounce ingredients like “tartrazine” and “disodium inosinate” and include vague statements like “may contain” (which we wrote a separate blog post about), consumers are unsurprisingly gravitating towards products like RXBAR.

But the trend isn’t limited to food. Increasingly, shoppers are looking to company values—including a company’s commitment to transparency—when making purchase decisions. More consumers are looking beyond price tag and factoring in product origin, reputation, and quality and ethical standards. The rise of fair trade, organic, and Certified B Corporations (“B Corps”) is a testament to shifting consumer preferences. Consumers are also looking at where companies donate politically: with a new app from startup Goods Unite Us, consumers can run political background checks on products to see what political party their purchase indirectly supports.

Corporate candor is a hot commodity right now. That much is clear.

A Label Insight study looking at consumer behavior around food and personal care products found that nearly 40% of consumers would switch from their preferred brand to one that offered more product transparency. A quarter of respondents indicated that transparency was the leading reason they remained loyal to brands.

We live in a digital age where consumers have access to unprecedented levels of information. In turn, they are using that information to scrutinize company decision-making and hold companies accountable for those decisions. The businesses that are quickest to adapt will likely outperform and outlive their peers.

Investors see the appeal.

Investors routinely evaluate the risk of any potential deal or transaction. Transparency helps mitigate these risks by identifying blind spots, which can in turn reduce reputational, compliance, and financial risk. Transparency also fosters trust: the foundation of any business relationship.

The metrics of business success do not always account for intangibles like transparency and trust—but they should. Facebook is learning that the hard way this month, as user numbers drop and #DeleteFacebook becomes a trending hashtag.

Trust is hard to earn, difficult to quantify, and easily lost. For these reasons, trust is arguably the most valuable commodity a company holds. The precursor to trust is transparency.

- Abi and the Allergy Amulet Team

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Invest In Women

Female leadership at Allergy Amulet from left to right: Susannah Gustafson (VP of Operations), Abi Barnes (CEO), and Meg Nohe (CMO).

Female leadership at Allergy Amulet from left to right: Susannah Gustafson (VP of Operations), Abi Barnes (CEO), and Meg Nohe (CMO).

While the Chinese zodiac sign for 2018 is the dog, a more appropriate symbol for this year is the woman.

Across the US, women are running for office in record numbers. France announced that it will begin imposing fines on companies that fail to eliminate unjustified gender pay gaps within the next three years. And in the US, movements like #MeToo and #TimesUp have forced our nation to address gender inequality, misogyny, and harassment.

One area where the gender disparity is particularly stark is the startup and venture capital space. In 2017, only 2% of all venture capital was invested in women-led startups, even though women own nearly 40% of the nation's businesses. That same year, the average financing round for women-led companies was less than half that of their male counterparts.

Why the glaring gender gap? While there’s no clear answer, many blame “mirrorocracy”: the idea that the VC community, lacking in diversity, tends to invest in individuals that look like them. Indeed, only ~8% of partners at the top 100 VC firms are women. A recent Harvard study further revealed bias in the line of questioning venture capitalists pose to female and male entrepreneurs. The study found that women were generally asked about the potential for losses, or what the study called “prevention” questions, whereas men were asked about the potential for gains, or “promotion” questions. For every additional prevention question posed to an entrepreneur, the startup raised an average $3.8M less.

Looking back at our own company’s fundraising trajectory, these figures are unsurprising. It took Allergy Amulet nearly three years to secure its first investment: a convertible note in 2016. And the vast majority of our current investors are men.

There’s a strong business case for investing in women. According to Credit Suisse, companies with female CEOs generate a 19% higher return on equity and a 10% higher dividend payout. A study by the Peterson Institute for International Economics found that companies with women in at least 33% of senior management roles accounted for higher annualized stock returns. The study also found that Fortune 500 companies with the greatest proportion of female board members significantly outperformed those with the lowest proportion.

We need to invest more in women, and we need more women investors.

Several VC firms are proactively seeking to address the problem. In a two-part series, Forbes identified several investors and VC funds committed to bridging the gender gap either by ensuring female representation among their partners, portfolio companies, or both.

As with any ecosystem, diversity breeds strength. The startup and venture capital worlds are no exception.  

- Abi and the Allergy Amulet Team

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