According to a recent U.S. Senate report, women business owners receive just 4% of the total value of small business loans and only 7% of venture capital funding. Fundraising can be an ordeal for any small business or startup founder. But it’s no secret that female founders face an especially steep climb.
That imbalance won’t be corrected overnight, but a few developments are at least starting to make the fundraising landscape more favorable for women business leaders. Not only are more women venture capitalists and angel investors bringing their expertise and assets into the market, the rise of online crowdfunding platforms is giving women-led businesses more options.
I reached out to two women investors to get their thoughts on how female founders can successfully hit their fundraising targets. Here’s what they had to say.
Before you start looking for a bank loan or investment, consider options that won’t cost you interest or ownership, says Trish Costello, founder of equity crowdfunding site Portfolia and CEO emeritus of the Kauffman Fellows Program at the Center for Venture Education. Well-known platforms like Kickstarter and Indiegogo can help startups raise capital and build buzz around your company, and they don’t come with as many strings as traditional funding sources.
“These can be very good options for women in the early stages, especially–and they’re non-diluted,” says Costello.
In addition to category-specific sites, Costello advises women to consider female-focused options. Plum Alley, for example, targets women with nonprofit, artisan, and retail companies, while MoolaHoop enables women-led local businesses to raise funds from within their own communities.
You may need an investor’s money, but a good investor should be able to offer much more.
“Don’t get overly fixated on the money,” says Lauren Flanagan, managing director of BELLE Capital USA, an early-stage angel fund that invests in companies with at least one female founder or C-level exec, or those interested in recruiting female leaders. “Make sure the right chemistry is there, and that the investor can bring real value.”
When possible, Flanagan and Costello agree, it’s important to work with the investors who are familiar with your industry. Every startup founder needs relationships with investors who can commit to realizing its vision, not just its fundraising goals.
As much as traditional investors need to recognize the leadership skills of the women they partner with, Flanagan adds that many women entrepreneurs can do more as well. “Be more confident, and feel free to dream big and go for the audacious goal,” she counsels.
In Costello’s experience, one thing that holds women founders back is the belief that they need to know everything before embarking. “I’ll include myself in that,” she says. “But we don’t need to know everything. We can have a huge vision without knowing exactly how to get there.”
After all, that’s the point of partnering in the first place. Women entrepreneurs should instead seek out investors who complement their own knowledge base.
“All the data shows that companies with women on their leadership teams perform better, have fewer failures, [and] are more capital-efficient and collaborative,” said Flanagan. But, she added, many male investors have more experience working with male founders. That sometimes makes it easy for them to overlook the strengths of their female counterparts.
Getting past that impulse can be an uphill battle for women startup founders, but it starts with knowing what you bring to the table. So brush up. Take the time to assess your strengths, and get comfortable articulating them. Not only will it be easier for your pitch yourself to investors, it will help you structure the environments most likely to contribute to your success.
This one’s obvious, but still worth emphasizing. Flanagan says her biggest pet peeve is when founders show up to meetings without having done their research. Before you meet with an investor, read up on their portfolio and positions, and make note of any common contacts or connections so you have a few talking points already handy.
Even if your company isn’t a match for the investor you’re meeting with, making a good impression means she might be able to tap her network in other helpful ways.
Amy Vetter is the global vice president of education & head of accounting-USA at Xero, an online accounting software for small businesses.