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Sallie Krawcheck Was the Queen of Wall Street, and Raised $100 Million to Launch Her Own Business. Then She Hit an Impasse She Hadn't Seen Coming. A little-known but common obstacle for women founders, the "Series B Cliff" can make scaling a company extremely difficult. Krawcheck is doing everything she can to help founders like herself get around it.

By Liz Brody

This story appears in the October 2022 issue of Entrepreneur. Subscribe »

Courtesy of Ellevest

This story is part of Entrepreneur's 100 Women of Influence issue. Find the rest of the list here.

Sallie Krawcheck has never been afraid of heights. She scaled her way up Wall Street into the CEO suites of places like Citi Private Bank, Smith Barney, Merrill Lynch, and Sanford C. Bernstein. She launched her own fintech company aimed at helping women build wealth. She raised $100 million. And then, suddenly, she came to a sheer drop-off that's little-known, but quite common. She calls it "The Series B Cliff."

Krawcheck's company is Ellevest. If she'd learned anything from more than 25 years in the financial industry, it was that money is power — and she wanted to invite all women in, no matter their economic situation. At Ellevest, there is no investment minimum, and memberships begin at $5 a month. The platform uses an algorithm based on the way women relate to finances (focused on life goals, for example, versus risk tolerance), offers money coaching, and has a separate tier for private wealth management.

Related: Why Finance Would Be Better Off With More Women Leaders

To build the costly infrastructure, Krawcheck hurdled the 2.3% odds of getting venture capital as a solo female founder. At least, she did for seed and Series A funding rounds. "But these asset-based businesses take time to get to profitability," she explains. She'd need to raise a Series B.

So Krawcheck approached endowments, pension plans, and traditional VCs — many of whom had been vocal about their intent to help women — only to find meetings going nowhere. As she soon learned, she was running up against a lesser-known statistic: Once a woman founder steps into the world of growth rounds, her odds plunge to 1%. That's without factoring in that 99% of VC money for fintech companies goes to men — and, on top of that, the revelations of a new study which found that female entrepreneurs who receive early funding from women are two times less likely to raise additional financing. (The implicit assumption: They weren't competent enough to get buy-in from men.) That's the Series B Cliff.

But Krawcheck knew there had to be a way. And eventually, she found it. Somewhere between traditional venture and crowdfunding, she came up with a novel solution: Through special purpose vehicles formed by existing funders, she brought in a number of accredited investors, the majority from underrepresented groups. The checks were smaller, but on April 6, Ellevest announced a $53 million Series B round. Two months later, Krawcheck testified about the Series B Cliff to the U.S. House Committee on Financial Services.

Related: 5 Ways to Lower the Gap in Funding for Women and BIPOC Entrepreneurs

Now, with $1.44 billion in total assets under management and 666,000 registered users, Ellevest will use its new capital to deepen its offerings and march toward becoming profitable. "One thing I've learned is to have the discipline — which I won't, I'm sure, if I raise again — " she says, laughing, "to find out how a firm makes its decisions. I know I can convince two or three folks. But if they then have to go in to convince their all-male partners, I might as well not waste my time." And the biggest lesson? "Lean on my network and my wolf pack and my gals. This is why I'm doing what I'm doing —­­ helping women invest so they can get more wealth, have more power, and change the whole money industry."

Liz Brody is a contributing editor at Entrepreneur magazine. 

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