How women can secure the investment they deserve
Women don’t ask for the investment that they need for their businesses; here is how to ask for more money and how to get it
Earlier this year, the Treasury published its statistics on venture capital funding highlighting that within the UK, only 1p out of every £1 of venture capital goes to women-led start-ups. Comparatively, all-male founding teams received 89p and mixed-gender teams got the remaining 10p. This means that men-led ventures received roughly £5bn in investment. The report also suggested that if the progress continued at the current rate, it will take more than 25 years for female-led companies to reach even 10% of all VC deals. This statistic raises a number of questions about female entrepreneurs and the investment landscape including; why do women founders receive so little funding? What can be done to increase investment in women?
According to the latest research from UKBAA, within the UK, only 14% of business angel investors in the UK are women and for many female entrepreneurs, the experience of raising finance is especially challenging when they have to present their business idea to a room almost entirely filled with male investors. Women have the means and the resources to invest into British businesses, but without accurate representation and the presence of prominent women lead angels, this will not happen.
The lack of women investors has a significant impact on women entrepreneurs as 54% of women angels invest in one or more female-founded businesses compared to a small minority of male investors. In addition to this, it is statistically proven that when a female investor backs a female-led start-up, it's 21% more likely to succeed; however, only 2.9% women founders successfully access equity investment for their business. Chief Secretary to the Treasury Liz Truss described the figures as “shocking”, but said women need to be less “squeamish” about making money. It is clear that empowering women to become successful investors will not only make the investment landscape diverse but also more accessible to female founders who seek funding.
It’s an old trope: men are cavalier with money, women are cautious. I’m usually reluctant to go along with generalisations, but when it comes to the pitching room I find that female entrepreneurs do undersell themselves; asking for just enough, or even less investment than they need. I hear myself saying: “Are you sure that’s all?” Whereas with men, I’m met with outrageous requests. The truth is that neither approach inspires confidence in investors. But the trouble women face is that they are walking into rooms filled predominantly with men, for whom a cautious approach may be a red flag. Here’s how to tread the line...
1) Have a growth plan
Women lack entitlement. They want to feel that they deserve it and have proved the worth of their business before asking for huge sums - something that tends to trouble men less. This can hold you back if you go into the pitching room feeling unsure of what it’s appropriate to ask for. But walk in with a forensically thought out plan of how you want to scale your business, and you’ll prove your ambition through the clarity of your planning. To me, it’s the best way to approach investment - don’t play games, and under or oversell yourself. Make a detailed, sensible, but ambitious plan of how you want to scale and work out how much money you will need to achieve that goal.
2) Work out how to execute it
To show what a fantastic business you’re building, you need to prove that you have the capability to grow - and we know female entrepreneurs are able to do that successfully. Don’t be afraid to show what you could achieve if you had the money to take you to the next level. To get to that point, you’ll need to spend on certain things: team members, marketing output, work on the product itself. Think about what you need and ask for it. Don’t feel that by not asking, investors might respect you more - they’ll just see it as a lack of ambition and a lack of understanding about how fast you can scale. You owe it to yourself to show that you have ambition for growth - and that growth needs money.
3) Investors aren’t the enemy
Women undersell themselves because of a misconception that the amount of money they’re asking for will correlate to the number of shares they’ll have to give up, and the control they’ll be forced to hand over. Women tend to create businesses that are personal, often springing from something in their own lives, so the idea of relinquishing control is understandably distressing. But this couldn’t be further from the truth. Angel investors aren’t there to take equity or exert control, we want to align with our entrepreneurs and support them. Ask for help, and show that you’re willing to collaborate at an early stage.
Jenny Tooth, UK Business Angels Association (pictured)