- Raising Finance
- Obtaining Funding
Breaking the mould: how to get more female-led businesses funded
Today, more than 400 million women are entrepreneurs or business operators. And yet, women receive 5% less funding than male entrepreneurs. Adrianna Samaniego – an investor at Female Founders Fund – shares her tips for those looking to right this wrong.
- Preparation is key to helping you secure funding. Make sure you have a good handle on what your business does and where it’s going.
- When looking for funding, have a realistic understanding of how much money you’ll actually need to make your business successful.
- Your relationship with your investors is a partnership. Take time to find the right fit in terms of goals, ways of working and personality.
One in three businesses around the world are owned by women. This figure is set to grow, too – with WealthiHer research showing that females aged 25-45 are showing a higher intent to start a company than men of the same age. What’s more, we know that closing the entrepreneurial gender gap could boost UK GDP by £250m and by $2.5tn (£1.8tn) to $5tn (£4.2tn) globally, according to the Boston Consulting Group1. All of this is why it’s vital that we put our collective shoulder to the wheel and ensure that women start to receive the same backing as men.
When Adrianna Samaniego’s company – Female Founders Fund – was born in 2014, less than 2% of venture capital was going towards companies with all female founders. “If we fast forward seven years, what do you think that number is today?” she asks. “It's 2.3%. It's gone back and forth and then back again. At one point it was 2.7%, but it’s never gone above 3%.”
So how can women begin to secure more backing, and, crucially, where should they start when they first begin to seek out funding? “Preparation and research are integral,” says Samaniego. “The first step is to consider precisely what it is that your business does, where it is and where you ultimately want to take it.
“Before deciding how to finance your enterprise, you need to determine how much money you actually need to make this business successful. Ask yourself what your expenses are, what you need right now, what will you need in 12 months’ time and the type of control you want to have. If you take a step back and think through those critical questions, you'll be able to decide if what you need is venture capital or funding and loans. But to get here, you really need to understand the ins and outs and the economics of your business. The pros and cons of the different funding types will follow.”
Samaniego believes that another vital piece of the puzzle is finding the right investors from a cultural fit point of view. “This is a partnership,” she says. “You’re going to be working with this person for five to ten years. So, you need to ensure that they're the kind of person that you want at the table because they will have a large voice and role in your business. Often, people are thinking primarily about cheque size, but what they actually should be considering is whether they can see themselves building mutual trust with this party.
“Ask yourself – do they understand what I'm doing? Are they going to micromanage every decision that I have to make? It is very much a marriage, and I think that a lot of founders forget that in the early stages. But try to be picky and really thoughtful about who you're bringing into your business. Because this is your baby and it will be your legacy.”
Samaniego is firmly of the opinion that pitching is probably one of the most nerve-wracking experiences that an entrepreneur will go through. “I’ve been on both sides of the table, so I know this,” she says. “The way to really stand out is to do your homework and be prepared. But you also have to understand that every investor has different priorities – they want different data and information. There’s no one size fits all.
“I think that today's investors, in particular, are looking for a great deal more than just a clear and coherent pitch. And especially in the current market, if I'm taking a meeting with you, that means I’ve already looked at your information – I know the basics already so don’t labour them.
“You’ll probably have around 30 minutes in total, but people make judgments pretty early on. And what they are trying to understand is – can this person be trusted with my money? Are you the right person for them? Do you have a plan and the experience to do this? Are you coachable?
“A lot of people lead with the data and not themselves,” says Samaniego. “If they are taking a meeting, assume that they already think that your idea is great and that you have the right skills. It’s your personality that is important at this stage. I've seen a lot of investors do a deal because of the person – they found someone they liked and trusted and who was a good fit for them. We're trying to understand you as an individual in that pitch. For example, if I give you feedback or I ask you a question and you get defensive, that’s a huge red flag.
“Yes, you want to cover the details, to be confident and show you have a clear roadmap. But remember that we are humans, which means we want to hear a story. So, focus on that and getting our attention as quickly as possible.”
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