Secrets Shared: 2 Female Founders on Best Practices to Snare Funding for Your Startup
By Lydia Dishman (Contributing Writer, Women 2.0)
If you’re a woman who owns her own business, you’re probably looking at the future in a glass-half-full kind of way. Optimism is running high among female entrepreneurs who say their businesses are poised for growth this year, according to the National Association of Women Business Owners. That’s despite 61% of women admitting that getting access to capital is among their biggest challenges this year.
In the first half of last year, women-owned ventures accounted for slightly less than 16% of all businesses seeking angel investment and 23.6% of these female entrepreneurs received funding, according to the Center for Venture Research.
Odds are, gender is playing a role in which companies get that ever-elusive funding. A new study from researchers at Harvard, Massachusetts Institute of Technology and the Wharton School found that investors tend to favor men, even when the content of their pitch is the same as a woman’s.
With the glass ceiling showing no signs of shattering completely, we turned to two women who are among that small percentage that snagged funding from angel investors and venture capital firms. Here are their best tips.
Pulling Up and Out of Bootstrapping
Monica Smith (pictured right), is a two-time entrepreneur and the current CEO and founder of Marketsmith Inc., and I.Predictus. Smith bootstrapped Marketsmith with what she calls “very difficult to obtain banking tools.” She started self funding I.Predictus (with Marketsmith as an investor) before shifting to angel funding, and now institutional investors.
Zoe Barry (pictured above), founder and CEO of ZappRx, raised over $2M in venture capital. She initially took took a job as a consultant for another healthcare IT company locally in Boston, which enabled her to earn a living while she filed for a patent and got her startup off the ground. Working 7pm until midnight was frustrating, Barry says because she was losing out on the more productive hours of the day. “You learn to go all in and overcome any obstacle. I did this until I received my first Friends/Family investment, about five months later,” she explains.
Barry says she created an Excel spreadsheet with all the top healthcare and tech focused VC firms to map out her plan of attack. “I rated them — I had the A class all the way to C,” she recalls. Additionally, Barry points out that she never cold emailed investors. “I waited for warm intros, the best are from entrepreneurs that are in the funds current portfolio, or an LP in the fund,” she observes. “Avoid, at all costs, intros from lawyers and investors passing on the opportunity,” Barry cautions.
Smith says she was also extremely strategic in her approach to identify investors and potential board members. To start, she educated herself on every aspect of raising capital. “I read every book I could get my hands on, and I asked a lot of questions,” she recalls. “I’m not going to be the one to repeat history just because I’m afraid to ask a question,” she adds.
She used three criteria to guide the process of pinpointing ideal investors.
- Those who had a deep knowledge of her and her strengths.
- Those who had intimate understanding of the marketplace and the problem she was trying to solve, and/or experience with the problem themselves.
- The input of trusted colleagues and experienced business leaders.
Practice Makes Perfect Pitch
Smith points out that she tested her presentation deck and refined it multiple times. “I focused my efforts on identifying every conceivable stumbling point, every mistake that had been made by others before me,” she says. Armed with that knowledge, Smith developed an efficient strategy for targeting the people who would “get” her vision for the company.
Likewise, Barry says, “I knew which fund, and sometimes down to which partner at the fund, that I wanted to raise money from. Then I worked my way up the list, starting with the C class.” This enabled her to practice her pitch in front of individual angels who rarely knew much about healthcare, she says. “These were certainly real investors, but it was a less risky proposition to pitch to this subset since I wasn’t dependent on raising from them.”
Through these experiences, Barry realized that most of the questions investors asked were the same. As for the “wild card questions” that entrepreneurs cannot predict, Barry says, “The only way to prepare for these is to hit the street and meet more investors.” This approach led her to SR1, the venture arm to GlaxoSmithKline (GSK), one of the largest international pharmaceutical companies. Barry says ZappRX was the first ever healthcare IT deal for them, helped she believes, by her thorough knowledge and preparation of the investment landscape.
Think Like a Man
Smith voices what many entrepreneurs –regardless of gender– know: the marketplace is very fickle. With the economy still careening from uncertainty to stability, Smith says, “If you want to gain investors’ trust and capital, it’s important to be very succinct about what you are going to do with that money and how you’re going to use it.”
What’s more she says, it’s important to recognize who’s at the table. “Be able to temporarily morph into what you need to be, rather than who you actually are,” Smith advises, “If you’re sitting across from a man, you have to be able to think like a man.”
Heaven Can Wait, Angels Can’t
“In my opinion — and this is in fact bolstered by data that investors have shared with me — women wait,” says Barry. That makes her want to shout: time kills all deals. “Women are more cautious and want to get all the answers and feel fully prepared, almost as though they are studying for a final exam instead of meeting with an investor,” she posits. “The reality is that no entrepreneur will ever know all the answers to all the questions. Instead, it is about your approach to how you would answer the question.”
So go ahead and throw yourself in the deep end, says Barry. “The truth is, the only way to refine your answer is to practice giving it, so go line up a list of investors that are not critical to closing financing and practice and stop waiting.”
Funded founders, what advice would you share?
About the writer: Lydia Dishman (@LydiaBreakfast) is a veteran business journalist writing about the intersection of technology, leadership, commerce, and innovation. Her work appears in Fast Company, Forbes, Entrepreneur, Popular Science, and the New York Times, among others.