Securing investment in the Valley

women in STEM

The Women in Focus study tour participants had the opportunity to meet one-on-one with numerous female investors and entrepreneurs during our week overseas. And of course, we grilled them on all the hard questions!

There’s been a lot written about the barriers facing women in business. But having the chance to engage in  candid discussions with women entrepreneurs and investors financing them, in one of the most competitive environments in the world was an extremely valuable opportunity.

These women acknowledged the difficulties that women encounter in the world of business, but said collecting data and developing a strategic plan of attack was the best way to combat uncertainty.

They shared the following insights with us to help improve female funding success:

  • Only 2% of female-led companies currently receive venture capital  investment.
  • The majority (89%) of venture capitalist (VC) investors are male.
  • Women founders seeking investment from firms with a woman VC cannot assume that they will have a better chance of funding than from a male VC. Don’t assume a women investor will understand or empathise with your business.
  • Female venture capitalists opinions are heavily valued (within their firm) when products target a female audience. If they don’t identify with or understand your market, they won’t fund you.
  • Male investors frequently seek feedback from the women in their lives (colleagues, wives, daughters, sisters) on start-ups that target female customers. However, the women they seek feedback from may not always be demographically representative of the start-up’s target audience.

With this information in mind, here’s some advice for securing funding:

  • A warm introduction to a VC founder is key to securing your pitch. A warm introduction is an introduction from one of their known and trusted connections (eg. an angel investor, another VC, an accelerator/incubator program managers) and is worth its weight in gold.
  • Do your homework:
    • Look at the history of the VC firm’s investments.
    • Choose VCs in the right part of their funding cycle – when they are looking to fund new start-ups?
    • Check that your business matches their funding selection criteria.
    • Choose VCs that can offer the business more than just money – for example, core technology experience, customer sector contacts, strategic partners.
  • Keep your pitch factual (facts and figures). Be passionate, but not emotional. Make your pitch clear and concise. The investor needs to understand the business and the opportunity regardless of your or their gender.
  • Identify your customer:
    • What do they typically spend in the category?
    • Why do they buy?
    • With what frequency do they buy?
    • What is the estimated lifetime value of that customer?
    • What is the cost to them of acquiring a customer?
    • How big is the market?
    • What other companies are servicing these customers?
  • To be successful in securing VC funding in the US, you’ll be expected to relocate to the US within the first year (seed round) of funding if you’re not already located there.
  • US VCs do not want first round investors to have too much ownership of the company.

Three things the VC firm Soft Tech VC look for

  • Smartass team – most important (the idea, market may change. The core team is the one that has to build the product – need to have faith in them).
  • Kickass product.
  • Big ass market.