11222017

Women in Business: How to Approach Fundraising With Investors

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There is still an enormous gap in funding opportunities for female founders. Without glossing over this reality, it’s worthwhile to discuss how female founders can leverage different approaches when navigating fundraising.

Venture capitalists must focus on ROI, or they don’t have a business model. Despite this, women founders still get fewer investments and less money even though they are proven to have a better ROI. According to First Round Capital’s review of their holdings, companies with female founders outperformed their male peers’ companies by 63 percent in terms of creating value for investors.

Despite the numbers and anecdotes, women continue to receive less funding. According to PitchBook Data, companies with only female founders accounted for only 3 percent of the total dollars raised by startups in 2016.

Fortunately, many venture firms are striving to repair this disconnect in their own way. Women-led investment firms like Golden Seeds and The Helm are a few examples of leaders aiming to bridge the divide while other organizations like ShEO and XFactor Ventures specifically seek out women-led firms. As this needed change unfolds, women founders can adopt a few strategies themselves.

In my time as CEO of Palo Alto Software, I’ve had the opportunity to mentor countless entrepreneurs as they plan for the future. From these interactions, I can speak to a clear distinction between the way that women and men founders approach fundraising in particular. The differences do not come down to aptitude, but a significant contrast in terms of confidence levels on the subject of financial forecasting for their respective companies.  

Too many times, I have heard women founders echo the sentiment, “I’m just not a finance expert – I’m not an accountant!” However, as I try to point out to every entrepreneur I work with, there is truly no one who knows their business better than they do, and that includes the finances. You don’t have to be an accountant to be the financial expert for your business.

Financials and financial forecasting is hands down what every founder avoids and dislikes the most, regardless of whether they are male or female. Despite this discomfort, every founder has the information they need to understand financial forecasting for their business. Possessing and displaying a strong grasp of your company’s financials is a shortcut to building the sense of trust and confidence that investors want to feel in their interactions with founders.

By understanding your financial drivers, and educating yourself about your forecast, you will be prepared to answer any financial question an investor throws at you. Even if it is something you have not modeled – if you know your drivers, and you know your business model, then you will be able to give an intelligent answer.  

Leverage financial forecasting skills when approaching investors

Rather than letting financials intimidate, founders should embrace them as a way to speak more directly and confidently to investors. When founders dig into their numbers more, building a financial model that directly reflects strategy is important (and makes life easier). It may sound obvious, but I’ve found that many entrepreneurs approach their financial forecasting as though it’s a separate entity, and something they are not qualified to do, when in reality, it’s simply a more objective representation of their business strategy. Ultimately, investors take financial forecasting seriously, so founders can leverage the objective nature of this category to ground and drive a positive investor meeting.

Too often, founders seem to get hung up on the technical jargon that comes with financial forecasting. Learn the terminology that you need, and trust that you already know the meaning behind the numbers. By taking a closer look at the numbers and how they relate to strategy, you’ll begin to dissipate the intimidation factor, and that sense of confidence will emanate in every investor interaction you have.

And remember this: Financially savvy people know that there are often various different accounting terms that mean the same thing. If you don’t know the term, ask for it to be explained. More often than not you will be able to respond, “Oh, you mean _____. Yes, I can walk you through my model and show you where _____ is.”

Find the tools that work for you

Our team built LivePlan to help entrepreneurs with all aspects of business forecasting, and to help them focus on their financial drivers and how they impact their business strategy. You can even use Excel to run and track your numbers, but make sure you are using a well-vetted worksheet with formulas that are tested and accurate. There are too many free Excel templates online that are not well vetted and oftentimes are not correct. Once you find the tool that works best for you, you’ll find yourself using it constantly and ultimately maintaining a constant pulse on your numbers as a result.

The VC world must continue to strive towards greater balance when it comes to investing in women founders, and truly learn to focus on ROI and the best possible business led by the best possible leader (regardless of sex). But while the VC world gets better at equity and diversity, I find it encouraging that the founders themselves are already equipped with the power to adjust their approach and take matters into their own hands.

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