When I set out to raise venture capital to grow my business, I knew it would be much harder than raising angel money, which I had done to get my business off the ground. Women CEOs receive only 4% of total venture capital invested every year in the U.S.
My entrepreneur group (Entrepreneurs’ Organization) is 85% male, so I am used to being one of the only bosses in heels, but 4% still seemed a surprisingly dismal number. As I looked into venture capital firms, I noticed their ranks were 99% male, and imagined that might have something to do with the 4% statistic.
The fact that my company is making a product for kids, sold mainly to mothers, also didn’t seem like it was going to be a big advantage with predominantly male gatekeepers. Like most entrepreneurs, the more I read about these obstacles, the more I became determined to be in that 4%.
By the time I secured funding, I had spent six months doing pretty much nothing but that. In order to make it over the various hurdles, I hired a business coach and a public speaking coach, tapped my advisors and board members for advice, did dozens of practice sessions, brought on new staff, created at least ten versions of my PowerPoint and pitched anyone who would listen. Last week I closed on $1.5M, and am proud to be in the 4% clique, complete with a new set of mountains to climb. It was one of the hardest things I have ever done, but definitely worth it. Now we have the capital we need to grow our business, plus a great new VC partner, and we have gained a highly experienced board member.
These tips might be particularly helpful and applicable to women, and to anyone who is learning the VC dance. The more time I spend with other entrepreneurs, the more I think our problems are mostly identical, regardless of gender. But, if you are a woman entrepreneur seeking VC funding, get some good running shoes, call your friends who’ve been through it, and get out there. I want future women entrepreneurs to see “VC funded” women led companies in at least the double digits!
My top 10 tips for raising VC money:
1) It’s a marathon, not a sprint. Start getting your company’s house in order 3-4 months ahead of when you will actually be out pitching. For example, we brought on a legal intern (free, found through our lawyer) who spent weeks working part time at organizing all our legal documents into a Dropbox folder (contracts, copyright and trademarks, incorporation docs, etc). That saved us a lot of work when the VCs who made their offer came in for due diligence, and helped us our deal close more quickly. I also made sure my team could function without me, as I was out of the office twice as much as I ever had been.
2) Meet with other entrepreneurs and advisors. I spent six weeks before taking any meetings with potential investors just checking in with Little Pim’s advisors and board, and fellow entrepreneurs who had raised VC money. They offered good, free and surprisingly consistent advice about how to position the company, how much to raise and how to find the right investors. Another advantage of these meetings, is that I found out which VCs my advisors know or have worked with. A warm introduction to a VC is not only the best kind – it’s the only kind.
3) Get ready to kiss a lot of frogs. I prepared my family and staff for the fact I would be putting myself out there and would need their support. It can be demoralizing to get so many “no”s (I have read that some entrepreneurs pitch over 200 times before they find a VC! I presented about 25 times). Each conversation or meeting may not lead to funding, but each one is a great opportunity to practice your pitch, improve your PowerPoint deck, and refine how you are describing the company’s potential and your need for funds. Even if an investor doesn’t fund you, he or she may be able to make introductions, so get into a positive mental space where you can give your best on each call or meeting.
4) Be prepared to grow. You may find you need a new set of skills to accomplish this. Even though I had raised over $2M in angel funding and was a professional nonprofit fundraiser for 5 years, I needed new training for raising institutional money. When I discovered I’d be pitching to 100 people at one VC firm, with a strict 10-minute limit and only one chance to get it right, I decided to hire a public speaking coach. This made a huge difference in my confidence level and in my delivery, and the pitch went great.
5) Do your homework. If this is your first time dealing with the VC world read up on the VC dance. Here are the resources I found most helpful:
– Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld, Jason Mendelson and Dick Costolo
– Mastering the VC Game by Jeffrey Bussgang
– “10 things to know before you pitch a VC” – two talks by David Rose on Youtube http://www.youtube.com/watch?v=lzDBrMisLm0
– Shark Tank episodes on Youtube http://www.youtube.com/watch?v=2-4KoO4-xxA
6) Learn to speak VC. VCs use a specific set of financial vocabulary you will need to understand and be able to use comfortably. The Venture Deals book will teach you most of what you need to know (I read it toward the end of my round and wish I had read it earlier). Do not think your lawyer will handle all of this; you need to be well versed in these terms to negotiate and understand your Term Sheet. These need to all roll off your tongue: liquidity event, Capex, valuation, dividends, preferences, tranches, and more.
7) Be a rock star. You need to own your power. Leave your insecurities at the door. This is no time for humility. Do what you need to do to get over any insecurities you may have about your ability to achieve extreme growth with your business (or at least table them for a while).
8) Know your business inside and out. You’ll need to speak with conviction about your margins, run rate, COGs, and Ebidta, both today and three years from now. I can’t stress this enough. You might be expected to talk about the product or service your company produces and the VCs will have some preliminary interest in that, but they will be most interested in the numbers. Make sure you have a good accountant to help you prep your projections spreadsheet and meet with advisors who can ask you practice questions before you have an actual meeting.
9) Have a sexy PowerPoint presentation. If you don’t have a graphic designer on hand, consider hiring someone to help you make an outstanding PowerPoint. It doesn’t need a lot of bells and whistles but it needs to be sharp. Favor the visuals. Not too much text and not too many slides. You’ll be showing it dozens of times so make sure it’s telling your story in the best possible way. We revised ours over 20 times before we came up with our final version. Ask advisors to show you decks they used or like. Load the presentation onto your iPad or whatever device you carry around (you never know who you’ll meet). I also recommend practicing using a remote clicker and not looking at the screen. My media coach helped me with this part, and David Rose’s talk focuses on this as well (see Tip # 5).
10) Look like you already have the money. Buy an expensive suit and make sure to look and feel like a million bucks if you are going to ask for a million bucks (or in my case, two).
Remember, the skills that got you here are not necessarily the ones you’ll need to get there. But you are entrepreneur, you can go get the skills, and then you’ll be glad you did.