Let’s face it, not everyone is comfortable talking about money, let alone asking for something like venture capital which has its own unique set of risks.
Evidence suggests that the issue of bias in the startup world makes asking for venture capital an even more daunting task for women, who raise half as much money as men before starting their business.
If you’re a woman entrepreneur looking to raise money, but you’re afraid to make the ask — you’re not alone.
While less than 3% of businesses with woman-CEOs are funded by venture capital, women-owned businesses are growing at more than 2 times the national average. Minority women are the fastest growing group of entrepreneurs in the United States.
The following article will offer strategies to help you get over the fear of asking investors for cash. It will address specifically the issues as they relate to being a woman in the diverse but paradoxical tapestry of modern-day entrepreneurship.
Master the Art of Raising Capital
Musician and performance artist, Amanda Palmer, produced her album, “Theatre is Evil” with her successful crowdfunding campaign. The project exceeded its initial goal by about $1 million dollars. This received both positive and negative attention from national and international publications like Forbes, The New Yorker, and The Guardian.
In an article by Wired Magazine, it noted: “the actions for which Palmer is attacked most often and most harshly tend to be the ones that conflict with what public femininity is supposed to look like.” When asking investors for venture capital, many women battle the same stigma. Women are 3 times more likely to come off as “pushy” rather than assertive when compared to their male counterparts.
Here’s how to ask investors for cash with confidence and diplomacy that can help you build relationships and secure venture capital:
1. Recognize Your Fear is Valid
Across the US, many people grow up with the notion that it’s rude to discuss money.
Laura Shin of Forbes suggests the taboo behind discussing money may stem from deeply ingrained ideas about wealth and privilege. Even for women who have a confident grasp on their personal concept of money, a real fear of asking for venture capital may be pervasive.
To successfully ask for venture capital, you have to be comfortable talking about money as well as negotiating.
According to The New Yorker, the data from four studies suggest women are penalized more often than men for negotiating, and specifically asking for more.
Your fear stems from a very real bias and the foundation of venture capitalism institutionalizes this bias. Only once you recognize it, can you work around it, using the strategies below:
2. Prepare For an Ask
Credit: https://www.writeups.org
Golfer Scott Stallings details the journey to getting investors, for him, was learning how to ask for money. He prepared to answer the seemly simple question:
Why should I invest in you?
For Stallings, being a self-proclaimed “great guy” didn’t cut it for financial tycoons looking to invest. Success meant learning how to perfect his elevator pitch and value proposition.
Unfortunately, women can’t just go into a venture capital meeting with their best elevator pitch and expect to get the same results. According to a study by Harvard Business Review, women get different questions from investors than men do.
Findings suggest that investors tend to ask men about their goals and aspirations. In contrast, women get questions that have to do with prevention. Such inquiries might include: “How will you prevent a security breach?” or “How will you ensure accountability from the top down?”
Women preparing for a venture capital ask should be ready to address vulnerabilities with a concrete strategy in place.
3. Frame Your Pitch with Bias in Mind
You may want to take negotiating advice from the wise and wildly successful, Sheryl Sandberg, COO of Facebook and author of Lean In: Women, Work, and the Will to Lead.
An article by Inc. quotes her suggesting that as long as bias exists toward women in the workplace, they should negotiate differently than men.
According to Sandberg, when asking for venture capital, women entrepreneurs should take a communal approach. Women entrepreneurs should steer away from appealing that investors believe in their overall worth and business contribution. Rather they should focus on how their mission impacts society and the people in the investor’s circle.
4. Be Prepared to Walk Away
You may have an investor in mind, but in the end, their ideas and yours don’t gel. If you can’t see a partnership working with this person, it’s not someone from which you should accept venture capital.
Learn to say ‘no’ diplomatically and graciously, but stand your ground.
For some women, saying ‘no’ can be a difficult task. Elle Magazine suggests women are held to a “higher ethical standard” in business, and sometimes this means pressure to say ‘yes’ to any demands made upon them.
Entrepreneur and negotiation specialist, Alexandra Dickinson explains that people asking for venture capital be prepared with “wish”, “want” and “walk” scenarios.
A “wish” scenario is the maximum amount of money you want to receive, and the most desirable outcomes. A “want” scenario is what you would take, and a “walk” scenario — you get the idea.
Getting Over the Fear of Asking for Venture Capital
In general, people fear to be vulnerable. For women, there’s an additional concern that vulnerability means weakness. Unfortunately, the small percentage of women-run businesses receiving venture capital reinforces fear.
But that hasn’t stopped women from taking the startup world by storm. With many obstacles in the path to a ‘yes,’ getting to the final stretch means having the fortitude to go forward in the face of rejection and knowing you may have to navigate bias along the way.
Susan is a writer, contributor and content marketer who publishes her own blog, Marketing and Murder. Susan’s greatest successes include a fruitful 10+ year career in marketing and outside sales, as well as a master’s degree in a liberal arts field and just being Mom to her young daughter.
