As female entrepreneurs, we’re often asked by our peers about the three Fs -- female, founder, and fundraising. How do you find female friendly investors? Are you taken seriously as a founder? How do you fundraise as a woman?
I'm the CEO of a five-year-old start-up. I don’t actually think much about being a female, or a female founder, or female founder fundraising for that matter. But the reality is that I should, because the facts are pretty indisputable.
While 30 percent of small businesses in the United States are female-founded, women received only 4.4 percent of total small business loans. And, according to Crunchbase, looking at venture capital dollars invested between 2010 and 2015 globally, only 10 percent of investments went to companies with at least one female founder -- 12 percent of all rounds. For seed/angel stage companies, 17 percent of all rounds went to companies with women founders.
So why are women entrepreneurs receiving so little venture capital? Unconscious bias is so real that it has earned its own term. If you look simply at return on investment, research by Illuminate Ventures shows that organizations with women in top management positions achieve 35 percent higher return on investment and 34 percent better total return to shareholders. Even the cantankerous Kevin O’Leary, venture capitalist and star of Shark Tank, said he discovered that the companies returning on his investments were all led by women, and he didn’t “have a single company run by a man that’s outperformed the ones run by women.”
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Are there too few women in influential venture capital roles? According to a recent study by The DIANA Project at Babson College, only 6 percent of partners in venture capital firms are women. Based on the underrepresentation of women in that industry, there is a lack of diverse perspectives and appreciation for the different approaches women often take to starting businesses.
Are women just different? There is a theory related to “birds of a feather flock together.” According to professor Ethan Mollick of the University of Pennsylvania Wharton School of Business, "if you share a gender, ethnicity or social background with someone else, you’re a part of the same personal and professional network and are therefore more likely to [be inclined to want to work together].” When this happens, women oftentimes are excluded from the club of influential decision makers.
Can women only be trusted to lead women-focused businesses? Investors seem to be more comfortable with female founders of women-friendly businesses in industries such as fashion, design, home goods or kid’s products. And there are great successes in this arena -- Houzz, a home renovation company; The Skimm, a daily newsletter; Birch Box subscription cosmetics; and my kid's learning company, Fingerprint. All these are founded by women and active in the women’s market. This attitude may actually be limiting the kinds of women-founded businesses investors will fund.
What I’ve learned.
As a female tech entrepreneur who has raised more than $24 million since 2011, including two rounds of venture capital, I have pitched hundreds of investors. (I’ve saved every business card since the beginning of this journey and trust me, it’s a tall stack). I feel like I’ve seen it all. But the thing is, my self-preservation instinct kept me from considering the unspoken “why” of rejection and focused on the “how” of getting good results.
Some practical advice.
Treat fundraising like a job search. Your business plan is your resume. Your pitch is your interview. Research the investors, understand their investment profile, and learn how they work.
Research organizations and firms that support women entrepreneurs. There are a lot of great resources out their like Golden Seeds, Astia, Female Founders Forum and many others.
Pitch everyone! As an entrepreneur you always need to be selling -- investors, partners, future employees, etc. You are the most important asset of your company. Network, network, network.
Ask for real-time feedback. You’re likely to get mostly rejections. Most investors won’t tell you why they are passing. You owe it to your company to ask for feedback at the end of every meeting versus hoping and praying you’ll get a follow up call. Ask:
- What are your thoughts on the market?
- What do you think of our business?
- Do we fit your investment profile?
- Would you be supporting our business with your partners?
- What is the process?
- What advice do you have for me?
Surround yourself with straight talkers. We all need cheerleaders to pick us up when we’re low and celebrate when we’re high. Just as important are the straight talkers, who will look at you and your business and tell you the truth versus what you want to hear.
Thankfully, if you’re reading this, my guess is that you are an entrepreneur, or aspiring to be one -- and likely, you’re already pretty amazing. Overall, my points on gender do not have to continue to be the rule. Good people and good companies win, whatever your gender!