Although it shouldn’t be, fundraising for female entrepreneurs can be more challenging than for their male counter parts, and unfortunately, it just seems to be getting worse (according to Harvard Business Review, 2021).
In 2020, female entrepreneurs secured only 2.3% of VC funding, down from 2.8% in 2019 (mainly due to COVID). According to a 2017 Fortune article, in 2016, venture capitalists invested $58.2 billion in companies with all-male founders, while women received just $1.46 billion. The discrepancy is due both to investors give less money less often to women; as female entrepreneurs, it’s a fact we must overcome.
Because Female entrepreneurs receive only about 2% of all venture funding, despite owning 38% of the businesses in the country, securing funding as a female entrepreneur is statistically grim (Fortune, 2017).
Difficult as it may be, it is definitely not impossible. As a female founder that raised $2 million in funding in two rounds, (one round that closed in 3 days) here are 5 tips that helped me through fundraising for my small business.
- Everyone loves a good story.
Story telling is how we make connections, and connections are part of how you secure funding. That means your pitch to investors is a crucial aspect of fundraising. It should tell the story of you and your business and have an emotional hook that will draw them in. Your pitch should make them want to be part of the company.
All that said, knowing your audience well will tell you how to tell your story. Is the group you’re pitching to passionate about investing in women? Push the female founded story. Are they interested in tech innovation? Gear your story toward how you’re changing the landscape in tech. By catering to what they’re looking for, they’ll be more likely to build a connection with you, and therefore invest in your company.
- It’s all about mindset.
You’re not asking for charity; you’re bringing them an opportunity. Reframe the idea of feeling bad for asking people for money to feeling generous that you’re giving them an incredible opportunity to bring value to themselves and others. Reframing how you’re approaching the conversation will not only bring confidence to your pitch, but it will show the investors that you’re giving them the chance to be a part of something great and worthwhile.
Having a confident, optimistic mindset is a powerful tool that can help you achieve your goals. If you’re fearful of raising capital, remember that the only way out is through. Stepping through your fear and preparing and perfecting your pitch will ease the stress. I know if I’m unprepared, my mindset is less confident and I’m more stressed.
- Ask for double.
Plan, forecast, and get a good grasp on what you think you’ll need to launch or grow your business. Then double it. The forecasts, despite the best planning, are usually never right on, and unexpected setbacks will always happen. Plan for contingencies and disasters, because Murphy’s Law is all too real, and whatever can go wrong, will go wrong.
Asking for double helps ensure that you won’t fail with the money you did secure because there was too little of it. Additionally, it prevents going back and asking for more capital too quickly after the first round.
- Good money vs. bad money.
Taking money from someone is a commitment, to say the least. Don’t take money from just anyone because any investment is a long-term engagement. Just like dating, there’s good and bad out there, and you have to make sure they’re the “one” before signing to any terms. You don’t want to be desperate and make the wrong move for your business by taking bad money. Holding out for the right investors is worth it in the end because the investment will be on mutually agreed upon terms that serve both of you. Knowing where your money is coming from and what the expectations are sets you up for a trusting relationship with your investors—and trust is key. You don’t necessarily want your investors calling you every week asking for an update on financials. When your investor’s core values align with yours as a leader, they will better understand how and why you make decisions for the company.
- Stick to your terms.
Setting your terms and not changing them was some of the best advice I received when raising capital. When you get in that room with each investor, they try to change the terms, so it better serves them, naturally. Setting and sticking to fair, reasonable terms that you’re confident in is imperative— you should have no problem having confidence in and sticking to terms that are fair for each party.
Fundraising is difficult, and fundraising for females even more so, as attested in studies above. Following the aforementioned 5 tips helped me tremendously, and I know it can assist other female entrepreneurs out there hoping to scale their business and do what it takes to build a company.