Between the pandemic changing how we think about “work,” the growing focus on values, and the resulting “big shakeup” in careers, more and more women are becoming entrepreneurs. According to the World Economic Forum’s 2022 Gender Gap Study, “Women will start 49 percent of new businesses in the U.S. in 2021, up from 28 percent in 2019.”
Unfortunately, according to a recent report from Pitchbook, the road to raising capital for these female entrepreneurs is a hurdle at best, as female founders only receive about 2.4% of venture capital.
There are far more women investors and investors seeking to invest in women-founded companies than ever before, but they are using the same criteria. It does not appear to reflect the way women “do” entrepreneurship, or the values women hold — or, in some ways, how workplaces and businesses have evolved post-pandemic, 21stone century, an ESG-focused economy. ESG has an environmental, social and governance focus and involves influence, accountability and transparency, as well as diversity of ideas and teams.
Business is still business, and the goal of business is to raise capital, so female entrepreneurs who want to raise outside capital to grow faster need to know the skills of the deal.
Here are six tips on how to prepare for pitching an investor, from a female investor who worked there as an entrepreneur and scientist and is now part of the executive team of a corporate venture capital firm, Ginger RosslockPh.D., HG Ventures (Exclusive interview from Electric Ladies Podcast):
1. “Do you understand what customers are looking for?”: Rothrock says to ask this question as you prepare your fundraising approach and pitch deck for investors. She advises understanding, “What do your customers say?” She warns that many don’t adequately listen to their customers’ real needs. This is where the Lean Startup methodology that customers find can help a lot.
2. Find a small niche to gain a foothold: “If you happen to be targeting a market with long lead times,” Rothrock advises, “is there a niche that you can get into faster?” She adds, “almost always.” This This includes understanding the supply chain and sales cycle.
3. “Do you know where you want to go?” Knowing how you make money is one of the jobs. Then predicting your finances or modeling can be a major stress point for entrepreneurs, especially for women who tend to think they have to know exactly how to get through each step (you don’t). Rothrock says to approach it in two ways: “The financial model is usually the digital side of your story. It’s storytelling through the numbers,” she said. One approach is, “What are the key milestones you’re likely to reach 18 to 24 months from now? … Maybe a pilot for a company, maybe a manufacturing scale, maybe something like a build A team of a certain size…you need to have a very firm target position there.
“Then you take the opposite approach. Like, well, if I have $2 million, what will I do with it? If I have $5 million, where can I go, if I have $10 million? .. …. if I raise so much money now, where else can I go?”
4. “You have to list every hypothesis you have”: What is your supply chain? What are your fees? How will the market change over time? What happens when oil prices rise or fall? Either way, what new legislation or regulations will affect your business? What changes have you seen in the market? How will the new SEC climate risk disclosure rules affect your opportunities or risks?
5. tell your story: Tell your business story in words and numbers, advises Rosslock. “People need to innovate in their business models or focus areas, go-to-market strategies to try and show revenue up front because at the end of the day, yeah, we’re looking for returns,” Rothrock explained. “We want to see you have a way to go. The path to real growth. So sometimes that growth isn’t just in one market. Often you stack markets together to pave the way and tell a story because it’s all about storytelling,” explains the client told What do you do to validate this storyline, “these are also early signs of the real market”. They may be smaller than you ultimately want, but growing your business’s story is a process.
6. Research investors ahead of time and interview them: Rothrock emphasizes that you can also decide who you want to work with. She said the best entrepreneurs they talked to were ready to do research on her company and understand what they wanted from the company other than money.
“If you were fearless, what would you do? What choices would you make? What actions would you take? … We (women) outperformed men, we achieved better results. We know Hard work leads to results…(We often make) professional choices because of perceived need or what I should be doing…(But) what if I could do whatever I want?” This is Ginger Rothrock Hope we answer the ultimate question.
Listen to Ginger Rothrock’s full interview on the Electric Ladies Podcast here.