Female entrepreneurs may tend to limit their pool of possible investors and therefore miss out on viable sources of capital. Many only consider venture capitalists, angel investors and friends and family as investors, but there are other options too, says Jenny Kassan, an attorney and adviser for mission-driven enterprises.
Dig deeper
It goes without saying that bias persists in the venture capital sphere, but the mismatch in the thinking of most investors and that of most female entrepreneurs engenders further complications. Kassan explains that venture capitalists like to invest in businesses that are on a very high growth trajectory and have plans for big exits — aka the liquidity event — within five to seven years.
On the other hand, female entrepreneurs are more likely to start businesses that are mission-driven rather than on track for dramatic growth. Instead of focusing on the goal of manifesting a big exit at any cost, they are apt to remain committed to creating a positive impact and work toward maximizing benefits for all stakeholders.
But running a mission-driven business can better position female founders to raise capital from people who do not consider themselves as investors, explains Kassan.
It all comes down to a mindset shift; that is being open-minded about who the potential investors are, which can ultimately lead to better funding outcomes.
Know the strategies
Drawing from the advice of experts on how female founders can raise capital, such as Kassan, The Billion Dollar Fund for Women and Beyond the Billion co-founder and managing partner Shelly Porges and University of Maryland Chief Innovation Officer Julie Lenzer, we have put together six unconventional strategies for female founders for raising capital.
1. Gain clarity about your goals and values
Having clarity about your business’s goals and values will guide you on how to go about raising funds. In fact, it is likely to drive all your other decisions. For instance, if you want a quick exit, you’ll raise capital one way, but if you are focused on a mission, you’re likely to go for obtaining it another way.
Also, being clear in your mission, objectives, value proposition and approach will help build confidence in potential investors that you know what you’re doing, states Lenzer.
2. Find investors in your network
If you look with an open mind, you will notice that there are investors all over the place. The reality is that a majority of the adult population in the U.S. can be described as investors, says Kassan.
Instead of limiting yourself to traditional fundraising sources, look for investors among people who share your mission and values. Such people might already be in your extended network, perhaps as part of an organization that you’re both involved with. Even existing and potential customers can be a great place to look for people who are passionate about what you’re doing.
For instance, if your business is committed to combating climate change, people who are aligned with the problem you’re solving or are also passionate about climate change could be promising potential investors for you.
What you need is to remember that mission alignment is the key. As Lenzer says, connecting with investors who share your mission and goals and therefore connect with you “why” makes it more of a partnership than feeling like trying to sell them on what your business is doing.
3. Know your numbers
The biggest mistake that female founders make is not understanding their financials, according to Porges.
Your financial numbers tell a story; hence it is important that you understand what story it’s communicating and what it means before you go pitching to investors.
Additionally, you should know what your exit strategy is, says Lenzer, and that includes when you expect it to be and an estimate for how much.
4. Customize your offering
You don’t want to use a standardized template from the web when pitching investors. Besides, there are several important benefits to customizing your pitch, says Kassan.
Tailoring your offering to the situation sends a message to potential investors that you’re taking it seriously and putting in your best effort. This can not only reduce the need for negotiation, but also lead to a win-win deal.
5. Build a strong team, including advisers
Investors usually invest in the team first and the idea second, so make sure your team can do the work and grow the company, says Porges.
She also reiterates the importance of having strong advisers, that is, people in the same industry who can augment the team, filling in skills the business needs but that the core team may lack.
6. Think big
One of the biggest challenges that female entrepreneurs face is they tend not to think about scaling their business, or about the size of their market opportunity, says Porges. She suggests that female founders start thinking big by asking these two questions: How big is the market you’re trying to address, and how big is the problem you’re attempting to solve? Simply put, female founders should think bigger, be bold and go all-in.
