First the good news: more women are launching startups–since 1998, women-owned businesses have increased by 60%. The bad news: How they’re financing their ventures isn’t quite as groundbreaking.
Women received an average of 52% less additional capital in small-business loans than men in 2010, and 21% of women entrepreneurs don’t even apply for fear of denial, according to the U.S. Chamber of Commerce site FreeEnterprise.com.
Down but not out, they’re making strides in other money-raising arenas. In 2013, women-founded companies represented 13% of venture capital deals–triple the amount from 2004. And women are a force on crowdfunding sites like FundRazr.com, where 58% of 2013 campaigns were started by females.
But it could be better, says Katie Fitzgerald, business development manager at CircleUp, a San Francisco-based equity crowdfunding platform.
“We’ve seen women spend 12 months chasing money,” she says. “It can be a challenge to raise capital, but women should tap into their strengths and learn how to network in what can be a boy’s club of investors.”
Forty percent of the companies Fitzgerald works with are women-lead. She offers five tips on how they can increase their odds of getting funding:
Attending tradeshows and industry events can help entrepreneurs build valuable relationships. For example, if you own a natural food company, you should be at Expo West, says Fitzgerald.
“If you don’t have resources to buy a booth, walk the show,” she says. “Tradeshows are where you learn the industry, see other companies in your competitive landscape and connect with people. This adds credibility to your story.”
Once you’ve established relationships with relevant industry leaders, ask if they’d be interested in participating on your advisory board. A board with industry veterans sends a positive signal to potential investors.
“Many industry folks are interested in advising new companies,” says Fitzgerald. “It’s a matter of knowing who these people are and engaging with them.”
You can offer an incentive for potential board members, says Fitzgerald, giving a small piece of equity, and often an advisor will become a future investor.
Investors look for entrepreneurs who are proactive and engaging, says Fitzgerald. Prepare for meetings–planned and serendipitous–by thinking how you can effectively communicate your story.
“How are you different? How do you compete? What do you do that resonates well with your customer?” says Fitzgerald. “These are the questions investors want answered. The way you would communicate with consumers is the way you should prepare to talk with investors.”
Tawnya Falkner, founder of the French sparkling wine company Le Grand Courtage, for example, is someone who communicates her brand in an authentic way.
“She isn’t afraid to share her story and her energy resonates well with investors and customers,” says Fitzgerald, whose company helped Falkner attract investment capital. “Her persistence helped her recently secure distribution of her products on all Virgin America flights.”
Investors are looking for entrepreneurs who know their financials as well as other relevant metrics.
“Be able to speak to things like revenue, gross margin, growth trajectories, cash burn, and more,” says Fitzgerald. “Be prepared with a valuation of your company, and be able to support your numbers.”
“One mistake we see women entrepreneurs make is leading with highest level of valuation. If entrepreneurs don’t have answers behind the numbers, it’s too scary for an investor.”
Once you secure funding, your job isn’t over. Too often entrepreneurs bring in investors and then don’t communicate effectively post-close, says Fitzgerald, who believes the lack of ongoing correspondence is a waste of a great relationship and potentially helpful feedback.
Fitzgerald suggests keeping investors abreast of business updates at least quarterly. Provide narratives about where there are wins and where there are challenges. And the most important piece of the relationship?
“Ask for help,” says Fitzgerald. “Give investors a chance to weigh in. They’re economically motivated to be brand ambassadors, and they may even help fund future rounds.”