Jenny Kassan, a lawyer and entrepreneur who strives to help founders raise capital from “normal” investors, said on my Electric Checkers Podcast recently, female founders, especially mission-oriented ones, tend to limit what they see as “investors” and miss out on a lot of money.
She said most women entrepreneurs think of venture capitalists (VCs), angel investors and so-called “friends and family” investors, but there are other options as well.
“There is certainly a bias in the venture capital industry, but… venture capitalists… like to invest in companies that are on a very high growth trajectory and have a plan for some kind of big event that we call an ideal liquidity event in five to seven years. Kassan explained. “Women entrepreneurs,” she said, “are more likely to start businesses that are not on this path.” Instead, “we prefer to maximize the benefits for all stakeholders and not just focus on this goal of the big exit at all costs,” she said, adding that most angel investors are focusing also on the output.
If you’re mission-oriented, Kassan explained, you’re even better positioned to raise money from people who don’t see themselves as “investors.”
“We just need to be more open-minded about who our potential investors are,” she added.
6 tips for fundraising – “Most of the time, you just need to change your mind”
Here’s advice from three masters in this area: Kassan, Shelly Porges, Managing Partner and Co-Founder of Beyond the Billion (focused on increasing venture capital funding in women-founded businesses and co-author of the recent Increase all report of Pitchbook on these issues in 2021), and Julie Lenzer, serial entrepreneur and director of innovation at the University of Maryland:
1. “The first step is to clarify your goals and values, as this will tell you how you are going to fundraise”: Kassan focused on this clarity as the first step, as it determines all other decisions. If you want a quick exit you’ll be fundraising one way, and if you’re focused on one mission you’ll likely do it another way, for example.
Lenzer pointed out that “being (being) clear about your mission, goals and approach” will also “instill confidence in others that you know what you are doing”.
2. Find investors in your network among people who share your values, create a partnership: Kassan insists, “There are investors everywhere. In the United States, the majority of the adult population is made up of investors. They can be part of your extended network, like “people who are part of an organization that you are involved in”, or “a really great place to look are your existing and potential customers because they are people who are very. likely to be passionate about what you are building. These investors can also be people aligned with the issue you’re solving, like climate change, “So anyone with a passion for climate change would be a great potential investor for you. ”
“Mission alignment is key,” Lenzer also wrote to me this week. “Connecting with investors who share your mission and goals – linking you to their ‘why’ – makes it more of a partnership than wanting to try and sell them what you do. ”
3. “Tailor your offer to your particular situation”, which also reduces the need to negotiate: You won’t just want to use a standardized document on the web, Kassan pointed out, adding that there are several important advantages to personalization. “The cool thing about it is that it really sends a message to your potential investors that you really take it seriously. And you think about it taking into account what you understood in the first step, your objectives, your values, your plans, your projections ”, she added.
Plus, when you do this, she thinks, “you hardly have to negotiate,” even though you’ll be open to counter-offers, your potential investors will see that “you’ve taken the time to think about this. … Which will be the healthiest for everyone involved.
4. “Thinking big”: Porges said that the biggest challenge she sees women entrepreneurs face is that they don’t think about scaling or magnifying their market opportunity. “You have to start to think big and that means several things: the first is the size of the market you are going to tackle and the second is the size of the problem you are trying to solve. ”
5. Know your numbers: The “biggest mistake” Porges sees in founders is “not understanding their finances,” she told me. “When an investor looks at your financial data, it tells them a story,” and you need to understand what story they’re telling and “what it all means, and be able to follow it regularly”.
Also know what your exit strategy is, according to Lenzer, including when to expect it and estimate how much.
6. Build a strong team, including advisors: “Investors usually invest in the team first, then the idea,” Lenzer pointed out, so make sure your team can do the job and grow the business. Porges also stressed the importance of having strong advisors – that is, those in your industry who can augment your team, filling in the skills that your business needs but that your core team may lack.
“The biggest problem that occurs when women start their own businesses”
Kassan observed that “the biggest problem that occurs when women start their own businesses” is this. “They started with a small budget. But it takes money to start and grow a business, “to invest in things, to make sure it’s a healthy, successful business before you can really start to make a profit.”
You can’t do it all on your own. You don’t have all the skills, time, and resources to do it on your own. If you try to do it on your own, “your customers are unlikely to be very happy because you also won’t be able to provide them with the service they would like.”
The more you ask for the funds you need, Kassan, Porges and Lenzer all insisted, the easier it becomes.