Raising capital is not for the faint-hearted. The process is rife with obstacles. Fundraising as a female founder can be especially challenging. As a female founder, here are five tips that can help you navigate the rough waters.
- Be confident.
Research has shown that females are less confident and less likely to self-promote than males. A study spearheaded by Wiebke Bleidorn of the University of California found that there’s a universal gender gap in terms of confidence levels. Regardless of culture or country, men exhibit higher levels of self-esteem than women. Research by Carnegie Mellon’s Linda Babcock found that men initiate salary negotiations four times more often than women. What’s more, when women do take the bull by the horn and initiate salary negotiations, they request compensation that is, on average, 30% lower.
Low levels of confidence will impair your fundraising efforts. In the Western world especially, they tend to equate confidence with competence. In order to gain the trust of an investor, you need to project a high level of confidence.
Women must muster confidence when negotiating with funders and potential investors. In negotiating with venture capitalists, be confident in yourself and your venture. Don’t allow investors to push you around. Negotiate for board positions, liquidation preferences, exercise rights, and any other terms important to you. Stand your ground.
There are countless ways to improve build confidence. There’s even value in “faking it till you make it.” Psychologist Amy Cuddy has found that by tweaking your body language and adopting “power poses” you not only give off an aura of confidence, you also trigger hormonal changes that actually make you feel more confident. One of my personal favorites is the “Wonder Woman” power pose. Stand with your feet apart, hands on your hips and chin tilted slightly upwards.
2. Do your homework.
Research has found that venture capital firms comprised solely male partners are more likely to invest in all-male founding teams. While female entrepreneurs shouldn’t shy away from these firms, it’s prudent to actively seek out firms and partners with a history of investing in women founders.
3. Don’t overlook crowdfunding.
For many female founders, the venture capital fundraising route is not optimal. For many females, crowdfunding is a more lucrative option. A report from PricewaterhouseCoopers (PwC) that analyzed 450,000 seed crowdfunding ventures found that women secure, on average, 11% more in pledge dollars than their male counterparts
There are several potential explanations. For one, in contrast to the traditional “boys’ club” environment that defines (at least for now) the venture capital community (only 4.4% of investors are women), the crowdfunding arena is much more gender balanced. This dynamic levels the playing field and renders female founders less susceptible to gender bias.
Another potential explanation relates to campaign strategies. A crowdfunding pitch involves telling a story and building a relationship with the audience. This is because, in contrast to venture capitalists, donors are motivated primarily to support a worthwhile cause as opposed to maximizing ROI. A 2015 study found that campaign pitches that employed emotional and inclusive language were more successful than those that employed business jargon. It also found that women are more effective at crafting this type of emotional language. Relationship building comes naturally to women.
4. Reframe questions from investors.
It’s a hard truth. Investors ask males markedly different types of questions as compared to females. A study by HBR found that investors are more inclined to ask male founders promotion-related questions (questions “focused on hopes, achievements, advancement, and ideals”), while female founders are more likely to be subjected to prevention-related questions (questions “focused on safety, responsibility, security, and vigilance”).
Why is this relevant? The study found that for each additional prevention-themed question posed to a founder, the funds raised took a beating – to the tune of, on average, $3.8M. The good news is that female founders can reframe prevention-related questions to their benefit. In a review of TechCrunch Disrupt entrepreneurs, the researchers found that those who were asked prevention-related questions and responded with promotion-related responses raised an average of $7.9M. In contrast, those who were asked prevention-themed questions and responded with mostly prevention-themed answers raised only $563K.
When fielding questions from investors, females should focus not just on the “here and now”, but on the future and their substantiated hopes for a brighter future. If you’re asked how you will retain customers, don’t just focus on retention strategies. Reframe the question and discuss the strategies you intend to adopt to secure new customers and expand your customer base. If you’re asked how you will maintain your market share, reframe the question and discuss your strategies for added growth and gaining an even bigger slice of the pie.
5. Set realistic expectations.
It’s a harsh reality. In 2016, women-led companies comprised only 4.94% of venture capital deals (the highest percentage in the past decade) despite being the majority owners of 38% of U.S. businesses. While we’ve made progress, we’d be hard-pressed to deny the fact that female founders still face gender biases.
A recent survey of women at the SheWorx100 Summit found that 94% of women surveyed experienced unique challenges fundraising as a female entrepreneur. A Swedish experiment found that even the type of language used by investors to describe females differed from that used to describe males. According to the report, “Men were praised for being viewed as aggressive or arrogant, while women’s experience and excitement were tempered by discussions of their emotional shortcomings.”
As a female founder, you’re bound to experience more hurdles than your male counterparts during the fundraising process. The name of the game is to be resilient and overcome the inevitable obstacles you’ll face. There are harsh realities associated with fundraising as a female founder. If you’re ready to boldly embark on the fundraising path or are currently struggling, keep in mind the five aforementioned tips. With resiliency and a solid strategy, you can break through the ceiling like I did and successfully raise a round.
The Writer is a CEO of the first people-based AI company, Node.io, and was the youngest employee at Google.