Entering the arena: Raising capital for your business

Our recent research has shown that female entrepreneurs receive 5% less funding than male entrepreneurs, globally¹. In a bid to try to rectify this discrepancy, we seek guidance from some standout female founders. Here, we take a step back and examine the different options available to those looking for backing and why their suitability varies from person-to-person and business-to-business.

Key takeaways:

• Keep your end goal in mind, right from the very start. This can help bring direction and focus to your business as you move through each stage.
• Take into account what stage your business is at as you consider which funding sources are right for you.
• Think about your audience and the messages you need to communicate when you put together a pitch deck.

Julia Elliott Brown, CEO and Founder of Enter the Arena – an organisation that empowers female founders in the pre-raise and investment space – is a big believer that when it comes to funding, first and foremost you need to think about your end goal. “This isn’t always easy for female founders,” she says, “because we often start our businesses based on a passion or because we see a problem that needs solving. Sometimes it’s because we want to do something different with our lives or even switch up our work / life balance. Focusing on the result can feel very masculine, but it’s what you need to do if your aim is to build a global business that is going to impact millions of people all over the world, and fast. Once you know what you’re aiming for, you can work backwards to figure out the funding path that will get you there.

For example, Elliott Brown stresses that the right route depends on where you are in your journey. “Venture capital, for example, is best suited to businesses that need to grow quickly; ones that are going to potentially need a lot of funding as well as multiple rounds,” she says. “These backers also tend to be much more interested in tech businesses that have reasonably low capital requirements, and more often than not they prefer companies that are already quite advanced.”

For those that aren’t there yet, Elliott Brown believes that debt is an important option to consider. “I know from experience that women can be a bit nervous about debt; they worry that it’s a risk. But I always question that – if someone is concerned about taking out a loan, and stressing how they will pay it back, why are they trying to get investors involved? Why should they back you if you’re not going to back yourself?”

Equity fundraising, which is essentially selling part of your business in return for cash, as well as angel investors, are other possibilities. “Angel investors are basically high-net-worth individuals who like to put their money into a venture. This is an enticing option because these people tend to be more patient when it comes to capital – they will wait longer to get a return on their investment. They can also bring their own skills and experience to the table, although admittedly some people find them quite meddlesome.” This means that with angel investors, it’s even more important that you do your due diligence and check that the fit is a strong one.

Crowdfunding is another powerful way to raise investment – and research points to the fact that women do really well in this space. “I think that's partly because of the businesses that we tend to build,” says Elliott Brown, speaking to the fact that women generally opt for consumer enterprises over B2B ones.

“Crowdfunding is great because it means that everyday people can put money into your company. So, if your business is easily understood by everyday investors, it will lend itself well to crowdfunding. Say, for example, you have a popular product that has a lot of fans or followers – a tribe who love what you do – it gives them an opportunity to put money into your business and be part of your success story as you grow.

“All that being said, you do need to secure a certain amount of investment before you are ready to take your pitch to the crowd; you might, for example, have to figure out how to get angel investors or venture capitalists on board first.”

Elliott Brown notes that founders can be fearful of crowdfunding because it means taking their business into the public domain. “They might not feel ready, but, again, I think that’s a fear they have to get over. Unless you enter the arena, you’re not going to make it happen. You have to put your head above the parapet at some point.”

What other words of wisdom would Elliott Brown offer entrepreneurs? “Your pitch deck is an integral tool when it comes to securing investment,” she says. “It’s not the be all and end all, however, and we should never expect it to do our work for us.

“It’s key to consider the purpose of the deck – is it to send as a teaser to an investor in order to secure a meeting? In that case, don’t give them too much information. Is it something that you’ll use to talk through the opportunity you’re offering an investor? That will be a fuller deck. Again, if you’re following up after a meeting, you’ll be sending something very different to what you would use to present to a room full of investors. It’s about having clarity around what it’s for and who your audience is.

“Once you know that, plan out what you’re going to say and the key points that you want to convey. Get the narrative super clear before you begin. You’re much less likely to lose your way in multiple slides, clipart and font size if you do it that way.”

There are many options for funding out there. With careful planning and consideration, you can find the funding sources that are the right fit for your business – no matter where you are in your growth journey.

Please contact us for further guidance on funding and raising capital for your business.