3 Ways Female Entrepreneurs Can Acquire VC Funding
Women are now starting businesses at a higher rate than men, yet they still receive a disproportionate amount of funding. In 2018, only 2.3 percent of venture capital (VC) was invested in female-founded businesses, according to the VC database PitchBook.
Despite these disappointing statistics — and perhaps, because of them —female business owners should be well-prepared when approaching investors. Here are three ways to approach the VC funding game.
1. Leverage Resources for Women
“Female founders must surround themselves with the right advisers who can fill the gaps,” says Ginger Siegel, North America Small Business Lead for Mastercard. “Before you go to raise funding, make sure your business plan is spotless.”
The Mastercard Women’s Business Advisory Council offers women a chance to learn from successful female founders, sharing their knowledge through mentorship and guidance.
“Female entrepreneurs can use the advisory to co-ideate, to get opinions, to build solutions [and] to get perspectives on what you need,” says Siegel.
The Small Business Association (SBA) offers programs for women, too. For example, DreamBuilder offers free courses and information on a variety of areas relating to business ownership, including raising capital. In addition, the SBA’s Office of Women’s Business Ownership has district offices that offer in-person training and counseling. Through SCORE, women entrepreneurs can get matched with an experienced mentor, who can help them prepare funding presentations.
2. Prepare Your Pitch
While all business owners should be ready for their investor presentation, women should prepare carefully to address the unique challenges they may face. A survey of small business owners conducted on behalf of Mastercard found that more than half of women struggle to be taken seriously as a leader and find it to be a major challenge.
When choosing a VC firm, look at its team of investors. Currently, only about a quarter of U.S. VC firms have women investors, according to Tech Crunch. Because we’re likely to connect with what we consider similar, this can create an unintentional bias in male investors. However, firms with a female partner are twice as likely to fund women-managed companies, reports Entrepreneur.
If you’re addressing a male-managed VC firm, begin the meeting by describing the big problem your business addresses. Support the opportunity with numbers, especially if your business’s target market is females. Do research on the firm, and compare your company to a brand within its portfolio.
3. Be Ready for Questions
A recent study from Harvard Business Review (HBR) found that female founders are often asked questions about safety and responsibility (or prevention-focused questions) whereas male founders are asked about their achievements and ideals, which are more promotion-oriented.
According to the study, an example of a prevention question might be, “Is this a defensible business where others can come in and take a share?” A promotion question, on the other hand, would highlight the potential, such as, “Is your target market growing?”
Entrepreneurs who were asked prevention questions raised an average of $2.3 million in funds, while those asked promotion questions raised an average of $16.8 million, according to HBR. The fix is in your answer. An entrepreneur who is asked how she plans to protect her share should frame her answer by providing size and growth potential of the overall market.
Persistence is Key
If your pitch doesn’t get funding, don’t be discouraged. Several successful female entrepreneurs were turned down for VC funding at one point. The key is to not give up. More women-led VC firms are being created, increasing opportunity in the future.
Until the playing field is leveled, Siegel stresses to female business owners that the issue most likely does not lie with them or their business. “This is a problem across the board — you are not alone,” she says.