Less than one per cent of UK venture funding goes to all-female teams and female entrepreneurs frequently feel judged to be less competent than their male peers. Thus concluded the UK government’s Alison Rose Review of Female Entrepreneurship. Alison Rose, recently appointed CEO of RBS states: “I firmly believe that the disparity that exists between female and male entrepreneurs is unacceptable and holding the UK back. The unrealised potential for the UK economy is enormous.”
Similarly, a report by Venture Capital, the international journal of entrepreneurial finance, recognises: “There is still a significant gender gap, with all-men venture teams being four times more likely to receive funding from venture capital investors than ventures with just one woman on their team.”
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So against this backdrop what are the secrets of success for women who want to raise finance? I spoke to three women entrepreneurs to find out what makes for a successful pitch.
Coming from male-dominated investment banking and therefore used to standing her ground, one female founder and CEO I spoke to, still faced 90 rejections before she won her first investor. Now on her third round of fundraising for her sauna and spa products business, it took her a year to secure her first $50,000. She persevered on the advice of her previous boss, who warned that she would need to talk to 100 people.
She experienced first-hand the hidden challenges as a woman dealing with mostly male investors. When her first investor turned out to have motives other than simple ROI, she had to find a friend to buy out his shares. Second time round was easier: a large group player with “real revenue, much more objective and no ulterior motives” invested $1.2m.
With her business in the beauty space she finds working with women easier. Women get the value proposition more quickly; they are more trusting and less sceptical, more respectful and straightforward and they ask fewer questions.
Her first tip is clarity: “Some men will string you along a bit. The more you can back up your business vision, the easier it is to say no to those you don’t want involved.”
One Founder’s Tips On Pitching for Investment
- Guard your time and energy: be careful to set the right tone, establish clear timelines and due diligence. Don’t let people string you along and waste your time.
- Have as much data and metrics as you can about your business.
- If you are operating the business and the fund-raising, bring in expert outside help when you need to.
Jeannie Arthur, serial entrepreneur, advisor and angel investor also learned early on that careful targeting is key. ”Investors all have different risk appetites. Scattergun ‘spray and pray’ doesn’t work. You have to be targeted, to network, look at who invests in what and why. It can be a painful process.”
Whilst she concedes there is evidence of both systemic and unconscious bias against women, she also believes that sometimes women have simply not followed the proper process. No one tells you how to do investment. There is a steep learning curve, but once you crack it, the money is there.
“My newest investment of £2m came from three angel investors. They said: ‘We will give you whatever money you need, as we know you’ll make it work.’ You just have to structure things properly.”
She knows men who accept that a woman who has reached a senior position is usually ten times smarter than a man. Some men are better at sales, but if a female entrepreneur can anticipate and answer the key questions: “If you’re female and clever, you can blow men away.”
Arthur’s Tips on Pitching for Investment
- Do your research: be clear about whom you are pitching to and why it will interest them.
- Network and create connections: referral counts as much as anything.
- Use expert help to refine your pitch and presentation.
- Build a support team. Create an advisory board or non-exec directors, experts you can reach out to. Pick their brains once a quarter, offer them one per cent equity and take them out to dinner occasionally.
Investor-turned-investment-entrepreneur Carla Stent, Chair of Savernake Capital Limited and experienced board member, previously worked for Richard Branson at Virgin. As an investor, she stresses the importance of face-to-face meetings: “You have to go on gut instinct. Virgin taught me to ‘Never invest in businesses without looking in the whites of people’s eyes.’ ”
It is, she says, a bit like a dating game: “You have to kiss a number of frogs before you can find an organization to help you source the right deals.”
Stent recommends Envestors: “It is one of the most professional [investment platforms] that I have found. They vet the deals extensively. They apply the same diligence that we would have looked at in private equity. They allow creativity to come through and look for different types of ideas. They do a quick snapshot and then give investors the data to look at. They have a very sophisticated approach and make sure the companies are ready for investment… They also have access to a variety of investors.”
While generally men are more confident, Stent has found that the women who come through Envestors are more certain, more thoroughly prepared. While the preparation may not make for a “comfortable and nice” environment, the women are much clearer about what they need to achieve.
Stent’s Tips On Pitching for Investment
- Prepare your escalator pitch (from the bottom to the top of the escalator). Be clear how your product will make a difference in the world. You only have a nanosecond to grab attention.
- Inspire your investors with your vision of where you are heading linked to your purpose. Be clear about what success looks like for you; it is not always just about scale.
- Know your numbers. As an entrepreneur be clear about your margins and the returns for your investors.
- Clarify your exit strategy for your investors. Put yourself in your investors’ shoes.
- Once you secure your investment, manage your investor relationships. Share the highs and lows and keep them informed of developments.
- Define a clear governance structure to maintain investor confidence.
Our final piece of advice comes from Elena Baeva, experienced CEO and board member, based on her experience of three rounds of fund-raising: “Don’t waste time. You don’t have to be ready. There is plenty of guidance out there. Don’t wait to line up your ducks in a row before you start those conversations.”
Harvard Business Review
Harvard Business ReviewSource