Trading up: How female entrepreneurs can tap into shifting investment strategies

Starting a business and steering it through new phases of growth is an exciting time. But raising the capital you need to take that next step can also be challenging, particularly as a female entrepreneur.

The good news is that things are starting to change, and the increasing diversity of venture capital firms and investment strategies are creating better opportunities for women in business.

“We started Greycroft because we believed that the venture capital model had changed to accommodate bigger fund sizes and had shifted away from a more collaborative, entrepreneur-friendly approach,” says Dana Settle, Co-Founder and Managing Partner at Greycroft, a venture capital firm.

“We started with the premise that we would go back to the old model that had worked so well – when every deal was syndicated and when investment amount was dictated by the amount required by the company, not the amount required to be put to work by the investors.”

Prior to founding Greycroft, Dana spent several years as a VC with Mayfield – where she also advised start-ups – and has also worked in investment banking.

As an innovative firm that’s pushing back against recent investment trends, Greycroft puts three principles at the heart of what it does. The support and empowerment of entrepreneurs, a focus on company values, and a dedication to teamwork based on the sharing of networks and expertise are key to supporting their investees in achieving sustainable success.

For Dana, investors should act as a sounding board for founders. Working with investors who provide an open-minded, honest space for this can be hugely beneficial for female entrepreneurs. As a result, getting comfortable with having these types of conversations can help uncover unexpected – and invaluable – advice.

When building a company, women are significantly more likely to under-estimate their business’ predicted growth in comparison to men.

“A man will say ‘I want to hit 200% within three months and this is how we will deliver it’,” says Helena Chan, CEO of HYC Jewels Ltd and angel investor. “A woman will say ‘I think I will achieve 100% in three months and this is how we are going to achieve it’. The way they sell themselves is very different.”

While women are less likely to be turned down for investment than men (50% compared to 58%), the way female entrepreneurs pitch can be perceived as a lack of confidence in their business plans. Changing the playing field in business is reliant on women being bold in their ambitions and creating large, independent companies.

When female founders create larger, independent companies, they also create more wealth for their investors – and since their investors tend to be more diverse, that gives more people the chance to become an angel investor.

None of us can predict the future, but having a five to ten year projection plan for the market that you’re in can help you ascertain if that market is the right place for you – at the right time – to achieve your growth goals. Arm yourself with knowledge around any predicted shifts, and use this to your advantage in devising a smart business strategy.

“We look for founders that are in really big markets that are undergoing some sort of massive secular shift or have big trends that are moving in,” says Dana. “It’s much easier to start a company that has incredible tailwinds as opposed to fighting headwinds.”

For any chosen market, Dana believes that it’s important to ask yourself questions – and keep asking them.

“Why go into that market? How have you prioritised different markets? What data do you have that indicates those markets make sense? Are you just being opportunistic for some reason, and if you are, then go back to the previous questions. You want to be sure there’s a very clear rationale for the company to launch into international markets.”

Pitching for investment can sometimes feel like rolling the dice and hoping that luck is on your side. But there is a more effective way. Mapping your capital requirements to the most appropriate investors will help ensure that you’re giving yourself the best chance of success, and not wasting your time in the process.

“Map the idea and the market opportunity to the kind of funding you are seeking,” says Dana. “There are lots of smaller funds, seed funds, and angel funds, for whom what you are offering is a great kind of opportunity, and look at specific ones that have experience in that industry. Ask yourself: ‘How well matched is what I’m doing with the people that I’m speaking to?’”

There’s no way around it; funding takes time. But by doing your research you can give yourself a better chance of being accepted and finding investors who are the best fit for your business – and for you.

1. Seek out innovative, forward-thinking VC firms or investors whose values reflect your own – and that of your business.
2. Be bold. Being realistic in your projections doesn’t mean down-playing your ambition or the potential of your business.
3. Strive to keep learning about predicted shifts in your market, and use these to seek out opportunities for growth or diversification.
4. Challenging yourself on the market you’re focusing on, and how it fits with your wider business goals, can help you keep the most important things front of mind.
5. Get mapping. Taking the time to match your capital requirements to the most appropriate fund or investors will boost your chances of success.

If you’re looking for the tools, connections and support to pursue your growth goals and to find out more about how HSBC is supporting female entrepreneurs, please visit this page.

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