The number of women-owned businesses went up 21% over the past five years, whereas the number of new businesses started overall only went up 9%, according to Business News Daily.
They also contribute significantly to the economy. For example, the National Association of Women Business Owners (NAWBO) reports that women-owned businesses generated $1.5 Trillion in sales in 2017, and that 20% of businesses generating over $1 million in revenue per year are owned by women.
Perhaps the most important stat to consider, though, is that women-owned businesses earn a whopping 63% higher return on investment than male-only founded firms, according to First Round Capital and Shelly Porges, Co-Founder and Managing Partner of the Billion Dollar Fund for Women and Beyond The Billion.
Yet, women-owned businesses struggle to secure investor funding. Only a paltry 2.8% of venture capital funding in 2019 went to female-founded firms, which as Pitchbook reported is an “all-time high.” Think about that: 97.2% of all venture funding went to male-founders. Huh?!
“The bottom line is, whether you care about parity in equity or not, the reality is, if you want a strategy for improving your returns, you ought to be looking at gender-diverse teams at worst and potentially at female -only founded teams,” Porges told me on my podcast recently.
So, what can female founders to do to raise funds?
Here are strategies Porges recommends:
1. “Think big”: Porges told me that the biggest challenge she sees women entrepreneurs face is they don’t think about scaling, or about how big their market opportunity is. “You need to start thinking big and what that means is a couple of things: One is, how big is the market you’re going to address, and two is, how big is the problem you’re trying to solve.”
2. Know your numbers: The “biggest mistake” Porges sees female founders make is “not understanding their financials,” she told me. “When an investor looks at your financials, it tells them a story,. You must understand what story it’s telling and “what it all means, and be able to track it on a regular basis,” and to answer questions about them.
3. Build an advisory team: Have a team of advisors across your industry, and with the business skills that you and your founding team do not have, that can help you along the way. This includes understanding the seasonality of your industry and related issues.
4. Understand the real problem you are solving: Investors want to know, “first and foremost, what problem are you solving, how unique s your solution and is it defensible,” Porges emphasized. “Defensible” means you can protect in some way, such as by patenting it.
5. Strategize scaling it: Investors will earn a return on businesses that are scalable. Once you have established that you have a big potential market, investors want to see that you have a strategy for capturing a healthy slice of that market. They realize your plans will evolve as your business does. If you are asking for money to scale, be able to cogently explain how you are going to use their funds and scale.
6. Show traction: “Traction” shows a potential investor that you have “proof of concept” of some kind. Ideally this is in sales and revenue, but if your business is pre-revenue, it could be by demonstrating interest in buying it from potential customers you have spoken to or surveyed.
7. Vet an accelerator program: There are many accelerators today across the country and Porges says they can be a great resource. Some of them charge to be in, or take equity (or both). Some are free to entrepreneurs in the local area. But don’t just apply to any of them. Make sure they offer introductions to potential investors and resources you’ll need specific to your business and industry, and that the accelerator will help prepare you to present to investors. Talk to graduates of the program and find out what kind of value they derived from the program, too.
Two more points Porges made are also good career advice:
8. Put your own finances first: Have your personal financial house in order first and make sure you understand them. The more stable your personal finances are, the better you will be able to maneuver and pivot as a business owner too.
9. “Take advantage of opportunities presented to you”: You never know what an opportunity may bring, so pursue all opportunities that show up.
I would add that noticing what people ask you to do, what they want to pay you to do, and how they describe your value, all are priceless sources of feedback about your markets and how you show up to other people.
It’s especially valuable if they explore an opportunity for you to do something you never thought about doing before – or working in an industry you haven’t before (such as when I was recruited to an automaker with no prior industry experience). It can show you new ways to use your skills .
“You will always have naysayers,” Porges reminded us, but – as an entrepreneur or in any endeavor – “you don’t know what you can accomplish until you try.”
You can listen to my full interview with Shelly Porges on my podcast, Green Connections Radio, here or wherever you like to listen to podcasts.