FUND RAISING STRATEGIES

Tried and tested strategies that female founders can use to raise venture capital – Merilee Kern

Relative to global entrepreneurship, the proverbial glass ceiling has seemingly been shattered. Statistics reveal that nearly half (252 million) of global entrepreneurs are women. As impressive as that metric is, it’s curious that the US Census Bureau’s Annual Business Survey report notes that a mere 20.9 percent (1.2 million) of American businesses are owned by women.

On a worldwide scale, only 4.7 percent of American business owners are women and this disparity is unacceptable.

Perhaps one glaring reason for this situation is the lack of funds since women reportedly receive less than three percent of available venture capital (VC) funding. This is confounding since businesses founded by women are shown to ultimately deliver higher revenues – twice as much per dollar invested than those founded by men.

Additionally, women entrepreneurs are not getting a fair deal. In 2019, only 2.8 percent of VC in the US went to women led startups. This dropped to 2.3 percent in the following year.

The ripple effects of the unprecedented global pandemic on companies with female founders may exacerbate the funding gap. As women in the workplace wince from the pinch of being asked to become more accomplished with less, female founders are railing against what they feel is lip service to entrepreneurial diversity and equal opportunity.

Nevertheless, there are ways to democratise the process and better position women to navigate the shifting capital landscape.

EXPECTATIONS There are a few universal truths to keep in mind when fundraising.

Investors use pattern recognition whereby they prefer to invest in the products or people that are most similar to their past successes, which will have a greater probability of future success.

This is based on an unconscious bias, and reinforced by influences that you can’t control such as their experiences, childhood and environment.

CEO and Founder of Getbee Thea Myhrvold recently raised US$ 1.8 million from top venture capitalists.

She recounts her own experience with bias: “There were questions hurled at me, which I don’t believe would have been asked of a male founder – such as ‘how will you make sure not to lose key clients?’ or ‘how will you prevent bankruptcy?’ It’s not that I was asked these important and fundamental questions but rather, that they dominated the conversation.”

Myhrvold continues: “I anticipated having to respond to questions about the market, my balance sheet, and my projections and strategy. The scepticism about my expertise and experience in this space shook me. And the line of questioning challenged my belief that the process is based on principles of fairness.”

“I expected questions that were clever and thought-provoking. They were neither. They were however, quite effective at distracting me and derailing the conversation. I remember feeling annoyed by the assumptions, offended by their audacity and embarrassed that it was happening to me… because injustices only happen to ‘other people.’ I walked away disillusioned,” she adds.

Then she discovered Dr. Dana Kanze’s TEDxPeachtree presentation on ‘The Real Reason Female Entrepreneurs Get Less Funding.’ Myhrvold says she learned three simple truths – unconscious bias exists; deal with it and get on with it.

So fix your expectations of fairness. Your goal is to combat pattern recognition with pattern recognition.

MINDSET Simply having a great business idea isn’t enough to lure a venture capitalist to invest millions. Previously, they were in a race to discover the next Facebook, eBay or even Spanx; but now they’re increasingly selective about the companies they invest in. Studies show that the average deal size and number of seed stage deals have shrunk.

MetroSpeedy CEO and Founder Nancy Korayim, who recently raised five million dollars, notes: “I’ve learned that raising capital is a marketing campaign. Your numbers matter and so does perception. If you think of your two minute presentation as a movie trailer told in real time, it is your moment to tell your story.”

She continues: “How would you frame it? What are the market conditions that sparked your idea? What problems would your potential investors say they struggle to solve? Find points of shared experiences that boost your likeability. Movie marketers aren’t only competing against other blockbuster movies, they’re competing to capture your attention and discretionary time.”

Korayim adds: “That translates into dollars. Likewise, you’re not competing against other founders in your vertical, male or female. You’re competing for the funders’ attention that may hopscotch across several great ideas they want to fund.”

A key aspect of your fundraising mindset is also knowing your value.

In your quest for likeability, don’t trade or discount the value of your business for it. Your business’ value proposition is like an uncut diamond. And your task is to slice and dice the numbers so that all the facets of your idea shine brilliantly.

The process is simple: track and analyse your fundraising data, and process any feedback on your storytelling. Similar to how you would conduct A/B tests of your product, platforms such as DocSend and CRM tools such as Foundersuite can prove priceless for optimising your business.

Find tools that help you track what refines your story’s key messages.

VOLUME Female founders typically generate higher returns on what’s invested in their businesses.

When you view your pitch as mastery of your numbers and marketing, you’ll want to focus on three facets: sharing your story with broader audiences, mentoring others and advocating for female founders.

Myhrvold reveals: “Some of my best funds have come through warm introductions; and others have come through by striking up what felt like random conversations while waiting in line to order a cup of coffee. One time, I was attending a conference and slipped away on a break to find a cup of coffee. As I was waiting in line, I noticed that the guy next to me and I were wearing matching red trousers.”

“I thought about breaking the ice by making a simple joke about great minds thinking like. We laughed and that sparked a good chat. I learned he was a senior executive at a tech company with a household name. We did the networking dance, exchanged business cards and promised to stay in touch,” she elaborates.

Myhrvold continues: “I brokered a few introductions to people that he mentioned he was interested in meeting. He followed me on LinkedIn and kept up with my postings. One day, he suggested we collaborate. Jackpot!”

On any given day, you never know who you might meet. You never know who’s listening to you and organising the information that their brain is receiving to form a judgement about whether or not to help you. Be genuinely curious about the people around you and invest in your relationships.

One of the best ways to accomplish this is to actively seek ways to be a giver and gracious receiver. Be sure to be clear in your requests from your network and offer to support them in return.

Partner at Unmatched Ventures Neetu Puranikmath offers advice on how to work within a flawed system even as we collectively lobby to improve it: “I suggest starting by checking your expectations of fairness in the fundraising process and adjusting your mindset accordingly. Make sure you know your stuff and raise your voice in support of other female founders.”

“As we cobble together an approach to recover from the pandemic, female founders are the overlooked key to economic development and recovery,” she notes.

The VC community should advocate for inclusive growth and invest in equity because deploying dollars for the benefit of female founders is a clear-cut way to boost global economic recovery.