No matter the gender, raising capital is one of the biggest challenges in starting a business. For women, raising capital can come with even more challenges, especially in the male-dominated world of venture capital firms.
According to research from IDB Lab, wX Insights 2020, a huge barrier for funding among female entrepreneurs is due to a lack of a professional network. Because of this, many women lack the access to important investors – despite research showing women-led teams generate a higher ROI than male teams.
Challenges for Female Entrepreneurs
Raising capital always has obstacles, but women face unique challenges that can make fundraising nearly impossible. Some of it is due to inherent gender bias and the way investors view them as business owners.
Male founders are often asked questions that are promotion-focused and cover the business’s future, projections, growth, and advancement. Female founders are asked questions that are prevention-focused and cover the current, responsibility, and security.
In addition, women are often asked inappropriate questions related to their gender, particularly about their personal plans for starting a family or getting married in the future. The idea behind this is that they may not be invested in the business once they reach these personal milestones.
Benefits of Female-Focused Businesses
Women may face numerous challenges in starting a business, but they do have some advantages to leverage. Many female entrepreneurs start businesses that have other women as the target market, making them their own ideal consumer. These may include everything from feminine care products to products for mothers.
In this respect, women have proof of concept to demonstrate to the investors that a gap exists in the market and they have a viable product to address it. They understand their ideal consumers and can provide a product that addresses their pain points.
Also, the industry as a whole is working to address the gaps in funding for female entrepreneurs. Numerous funds and organizations exist to invest in, mentor, and help women- or minority-owned businesses and increase the presence of these groups in the business world.
Fundraising Strategies for Female Founders
Know the Numbers
In general, women are more relational in their approach to fundraising and face pressure to be polite or nice, rather than firm and assertive. Women are more organized overall, however, which can provide an edge when speaking to investors.
A lot of women enter into fundraising pitches with their story and the brand values ironed out, and tend to focus less on financials . It’s important for women to overcome the inherent biases that exist in the venture capital world by coming prepared with numbers in order, including the financials and marketing strategy for the business.
Venture capital firms are traditionally a “boy’s club,” with male-dominated firms investing in male founders. This can make pitching to investors extremely intimidating. Something to keep in mind is that the goal of VC firms are to find good investments for their Limited Partners. If you can demonstrate your business is a good fit for the firm and create a clear case for how you will grow and succeed, this is all they truly care about. Keep in mind most VCs have a finance background so again, know your numbers!
Crowdfunding has less gatekeeping than venture capital firms and may be more advantageous for female founders. Based on research from PricewaterhouseCoopers, women secure 11 percent more pledge dollars than male counterparts on average from crowdfunding.
This could be because crowdfunding is more diverse, or because crowdfunding has more women overall. Either way, women are less likely to encounter significant gender bias when seeking funding. Crowdfunding also looks for more than profit opportunities – participants are invested in the stories and the “why” of the brand. Overall, women are more adept at creating these compelling narratives and emotional hooks.
Have a Plan
As discussed, the questions asked of female founders tend to focus more on maintenance and prevention. Female founders may be asked about plans to retain customers, rather than well-rounded questions about acquiring customers and increasing their lifetime value. This framing can set women up in a way that they can’t show their strategy for the present and future of the business.
Women should always enter into fundraising pitches with a strategy in mind. Along with proof of concept, women should have detailed plans for marketing, especially with awkward or not-safe-for-work products. These products, many of which fall into the female market, are more difficult to market and pitch, but they satisfy an undeniable need in the market. This can be attractive to investors, and it’s important for founders to get more comfortable and strategic about their approach to marketing a controversial product.
Women face a lot of inherent bias and hurdles in startup funding, but the industry is changing. Female founders have new opportunities to seek funding that’s less male-dominated, and these strategies can help with crafting a solid pitch and showing investors that they’re driven to succeed just as much as men.
Frances is the founder/Captain Awkward/CEO of Awkward Essentials, a company that makes products that address the unspoken parts of hygiene. She is also the inventor of the dripstick — an after sex cleanup sponge. Frances Tang never intended to build a company around a post-sex cleanup tool, but the Awkward Essentials founder saw a need — and an opportunity — for an entrepreneur willing to go there. Now, Frances is leading a revolution for female founders, showing that fearlessness is a founder’s most important value.