Founding and funding a startup presents a unique set of challenges for women, ranging from the lack of representation to the importance of networking.
The program How to Fund Your Woman-Owned Startup, hosted by Crain’s Detroit Business and sponsored by the Michigan Economic Development Corporation (MEDC), asked a panel of women founders to share the tips and tricks they used when entering the world of high-tech entrepreneurship.
Underrepresentation in Entrepreneurship
Women face specific challenges when funding a startup, many of which correlate with a lack of representation in entrepreneurship and venture capital. To illustrate this pattern, Emily Heintz, Founder and Managing Director of EntryPoint, points to investment data. According to her research, out of the total $2.1 billion invested in Michigan startups in 2019, only $146 million was invested in startups led by underrepresented CEOs. Further, of that $146 million, only $29.4 million was invested in startups led by a female CEO. Similarly, of the 80 venture capital professionals in Michigan, only 16% are female, compared with 21% nationally. According to Emily, this lack of representation for women makes it even more imperative for women entrepreneurs to build networks that can support their unique needs. Two examples of these groups are Shine & Rise in Ann Arbor and Detroit Women’s Leadership Network, which both provide spaces for women to connect and learn from one another. Business owners ought to focus on building relationships, supporting other women, and knowing female investors within their own sectors; such work can open doors and help women-led startups succeed.
The Importance of Community
It is important for women entrepreneurs to find their community, which can come in many different forms. Jessica Willis, Founder and CEO of Pocketnest, explains that communities of startup founders are one way to meet this need. These communities, such as Bamboo Detroit or Ann Arbor SPARK, allow founders to cultivate a network. According to Jessica, another option for entrepreneurs seeking community is to participate in a pre-accelerator, including gBETA Detroit (check out gBETA for Mentor Speed Dating), Startup Boost Detroit, or Ann Arbor SPARK. Pre-accelerators provide growth through valuable hard assets with each giving a different takeaway, such as a pitch deck, executive summary, or competitive landscape. They’re typically free or offer scholarships, and also provide mentorship, advice, and the support of people who love startups so that participants can ensure that this is the right path for them. Additionally, in terms of reaching out to engage with communities, Jessica provides some advice that she wishes she had been given when starting. Specifically, entrepreneurs should not be arrogant, listen to advice, get a mentor, and develop thick skin.
The Perfect Pitch
According to Kim Gamez, Founder and CEO of Mi Padrino, a startup company that has raised $2.5 million, the importance of the pitch cannot be understated. As such, she offers up-and-coming entrepreneurs five key considerations when planning a pitch.
- An entrepreneur should recognize that the investors are investing in her, so she should be herself when pitching.
- An entrepreneur should practice every pitch. If a new business owner can engage her middle schooler for five minutes, she will know her pitch will be able to engage investors.
- An entrepreneur should know her audience and tweak her pitch to include any necessary context.
- An entrepreneur should spend time researching her investors; this way, she won’t waste time on investors that don’t invest in her area, stage, or sector.
- An entrepreneur should keep her message simple. She should minimize the words on her slides and use simple words for a vast audience.
In the How to Fund Your Woman-Owned Startup, Kim also has a recommendation for how to approach any questions asked after the end of the pitch. New entrepreneurs want to make sure they know how to get out of the hole quickly for questions they can’t answer. In these circumstances, Kim employs the following formula: “This is what I know. This is what I don’t know. And this is how I’m going to get there.” By using this formula, entrepreneurs can provide a straight answer and end by explaining that the investor’s funds will allow them to “get there.”
As for pitch decks, Kim indicates that every entrepreneur should have three different pitch decks: a presentation deck with very few words that is adaptable for different lengths of time; an intro/teaser deck with about 7 slides that gets someone excited to talk to the entrepreneurs, but doesn’t give away everything; and, a full email deck with about 20 slides to send before meeting with someone the first time, allowing them to review and come to the meeting with questions. When communicating with potential investors, she also recommends that entrepreneurs use Google Slides in order to keep the deck current, as well as offering a time to meet or allowing the investor to access their calendars. Finally, new business owners should keep the conversation going with current and potential investors by sending quarterly updates. By sending a teaser to potential investors or forwarding articles that make her think of them, an entrepreneur can build a relationship with individuals to expand her network and attain the funding she needs.
Are men doing it better?
Monica Wheat, Co-Founder and Executive Director of Venture Catalysts, offers further advice as to how women can succeed in the startup world. Entrepreneurship is a game of risk and aspiring business owners must be willing to chase it down. Entrepreneurs who wait until everything is “perfect” will only slow down – both in terms of business development and return on capital. Rather than waiting for perfection, it is important for business owners to proactively approach people, pitch, apply to accelerators, and generally see if venture capital is right for them. If an entrepreneur has the opportunity, she should take advantage of it, as women and members of other underrepresented groups tend to hesitate and jump in too late. When emphasizing the importance of getting started, Monica turns to the quote, “When you launch your business, you should be ashamed of it.” Entrepreneurs should put feelers out and get feedback from customers; otherwise, they will lose their traction and fall behind the competition.
Further, new entrepreneurs should do their research to learn the language of high-tech entrepreneurship. While it can be intimidating at first, the more a business owner uses this vocabulary, the more confident she will become. Business owners who do not understand terms or concepts should not be afraid to ask questions and clarify the norm, as even the “norm” can change depending on the city, market, or event. Additionally, knowledge saves time – an entrepreneur should know who she is approaching, know what they are seeking, and use that in the conversation.
- Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Field and Jason Mendelson
- The Business of Venture Capital by Mahendra Ramsinghani
Watch How to Fund Your Woman-Owned Startup, hosted by Crain’s Detroit Business and sponsored by the MEDC:
MEDC offers various recources for startup companies. According to Nadia Abunasser, Federal and Development Projects Director of MEDC, entrepreneurs ought to contact their local SmartZone for entrepreneurial support. SmartZones are designated regional organizations through which entrepreneurs can access support services and information regarding local ecosystems. In addition, MEDC’s Entrepreneurial & Innovation Initiative provides critical early stage funding to support the success of startups. A few specific programs within this initiative include the First Capital Fund (managed by ID Ventures), the Pre-seed Fund III (managed by Michigan Rise), the Business Accelerator Fund (managed by the SmartZone network), and the Emerging Technologies Fund (managed by the Small Business Development Center).
While up-and-coming women may face specific challenges in the entrepreneurial world, there are many accomplished women who have come before them who can offer advice, resources, and tips for success. It is imperative for women with new companies to find a community and take advantage of the resources that many organizations provide, from networking groups to business acceleration services, in order to be best set up for success.