When I first read the UK VC & Female Founders report* earlier this week, I was stunned into silence. Actually, I’m sure I gasped out loud then fell into silent disbelief. The report is devastating and shines a great big light onto the gender bias and inequality that exists in the venture capital (VC) world for female founder businesses.
- for every £1 of venture capital (VC) investment in the UK, all-female founder teams get less than 1p, all-male founder teams get 89p, and mixed-gender teams 10p.
- venture capital investment in start-ups with female founders is increasing but progress is very slow. At current rates, for all-female teams to reach even 10% of all deals will take more than 25 years (until 2045).
- 83% of deals that UK VCs made last year had no women at all on the founding teams.
The British Business Bank
I have spent the past 23 years navigating the corporate and entrepreneurial worlds, working and engaging with women in business teams and initiatives, joining women-led networking groups, facilitating women-focused events, supporting the #WeForShe movement at every opportunity, volunteering at women-at-work NGOs, sitting on the executive team / Board of female-centric networking associations, mentoring peers, supporting less-experienced women in my field and across other industries, contributing to online and in-person forums, and just last week – speaking on a panel at a women-centric conference. I run a business that works solely with a female client base. I am a born advocate of women.
So, imagine my utter shock and disgust when I read the report inside out and back to front. I was absolutely devastated. Why? Because my business has been preparing over the past 17 months for the foray into the “start up capital raise” phase… and finding out that, in the UK less than 1p in every £1 that is invested is in a female-founded business, is nothing short of a sledge-hammer smashing my business into a million pieces. I’m confident this is prevalent elsewhere too, including the US, Canada and Europe.
The start-up journey is tough – every entrepreneur will tell you that. Only the brave (who, incidentally, are well past the start-up stage) will give you the warts and all bootstrapping story. Most, including me, will not. We don’t want to relive the days, weeks and months that we’ve sacrificed everything for the dream of our business. We quietly take our business from a tiny tadpole to a slightly beefier tadpole in such painfully slow steps it’s almost unreal – we’re pretty sure our cheerleaders don’t need to know every detail, and we’re pretty sure they’d label us delusional if they knew just how close to zero we are.
When you’re at the exact point of sourcing capital investment to trigger the start-up to scale-up stage in business, you’re facing the inevitable “pitch”. Pitching is either something you’re great at, or not. Practice certainly does make perfect, but you just have to watch a few episodes of Dragons Den, Shark Tank or similar, and you’ll get a feel for how badly a pitch can go, regardless of the practice.
But taking this back a step to the main issues raised in the VC report and you’ll find something far more shocking. It’s not the pitch that is the problem, it’s getting these VCs to even open your pitch deck that is the biggest stumbling block. Who knew?
The Pitch Deck
The pitch deck can be a standard 11-12 slide document – let’s keep this simple and say it’s a PowerPoint presentation – that walks a potential investor through business inception, problem your business is solving, solution your business is providing, main competitors and why you’re better than them, potential market size, how much money/investment you need and what you’ll spend that money on, the team, some financial stats, and all at a very high-level – no unnecessary detail! All fairly basic and self-explanatory.
You’ll find a variety of funky pitch decks where barely a word is noted on some slides (all graphics) to videos, GIFs, empathic-driven quotes, painfully dry, very exciting, and so on. The key to creating pitch decks lies in understanding your audience: who is reading this particular version of this pitch deck? Nail that and you’re getting the pitch deck concept correct.
In a city near you you’ll probably find a range of pitch practice nights and incubators that are fine-tuning your deck so that you can deliver a coherent and concise pitch in 30/60/90 seconds. Sometimes you’ll have 3- or 5-minute pitch events – giving you longer to walk your audience through your beloved and precious business.
But what if you’re nowhere near a friendly pitch practice event? Or what if you’re not interested in that but want to send your pitch deck directly to the people that truly matter: the potential investors.
In creating your “potential investor” funnel and completing your research into who is currently the best fit for your business at the stage your business is at, you’ll have a list of individuals and companies that you’re ready to cold call. Business angels and VCs will be on that list and this is exactly where the problem lies for female-founder businesses – you’re not on their radar.
The report reveals the first of many shocks:
The new dataset shows that 75% of pitch decks which reach a VC are from founding teams with no women. 5% are all-female teams and the remaining 20% are mixed gender teams. Overall, there are very few women that reach VCs.
If you’re engaging in any business forums, peer-mentoring groups, incubators and accelerators, then you’ll know that a pitch deck is considered a staple in your data room – I’ve yet to hear of anyone who does not have the deck ready to send out, but now I’m thinking; why bother?
I’m a born analyst. I love spending time digging deep and figuring out what is going on. I work diligently through any issue that comes up, cross referencing, sourcing material, content, articles – anything – that will support or disprove my initial theory. I’m very open minded at the outset and only once I’ve started this process do I find a theme.
My business is firmly at the start-up stage. I have spent months testing, evaluating, tweaking, changing and redoing every aspect of the content, service for sale, client and business. It has been an amazing process and I’ve loved pretty much every minute of it. The business is ready though for investment and so I began the “raise” phase in November last year.
I originally came up with my business idea (a fitness, health and wellness digital platform for working mothers) when I lived in Switzerland. Not seeing a single pitch event or accessible business angel network led me to move half-way across the world to immerse myself into the entrepreneurial ecosystem that exists in Vancouver. I have no regrets with my decision – moving to be closer to a hub of business activity, access to events and people that would help me grow and allow me to get my business concept going, was exactly what I needed.
As an ex-corporate banker with extensive lending (credit) experience, chartered banking qualifications, an honours degree in Financial Services and “Chartered Banker” status, I’m an entrepreneur with an advantage – I’ve worked in the finance industry and know what the lending process is like – whether that be debt or equity the result is the same: a business getting funds to grow. The aim for the entrepreneur is to get money, the right money, and I’d say that I’m comfortable with the financial decks and modelling needed to intrigue a potential investor and to present an accurate financial forecast for my business.
But I’m jumping ahead at least two steps here – having a strong business background and a well-thought out and tested business idea mean very little when, as reported, my pitch deck won’t even be opened, if I send a cold email submission to VCs:
Pitch decks from all-female founding teams make up 5% of all approaches. They approximately maintain this proportion through to funding.
A male connection on Linked In recently offered to send out a copy of a “brilliant” VC pitch deck template to help anyone nail the perfect copy. I put my hand up in gratitude, and then also posed the following question:
What should a female founder do differently in her pitch deck that will result in being looked at (with the proviso that she has had the warm intro…)?
The response was typical:
I find that in general, male entrepreneurs brag way too much in their pitches, and females don’t brag enough. So, first step… don’t be so humble?
(I’d agree with this – and see the “Fyre Festival” pitch deck that is doing the rounds and you’ll also agree with this).
However, the UK VC report continues with:
TO DECIDE WHETHER TO INVEST, VCs FOCUS ON THE FOUNDERS THEMSELVES BECAUSE OF THE EARLY STAGE OF THE BUSINESS AND THE SCARCITY OF DATA. At the early stages where VC firms make their initial investments, there is little rigorous, objective information available. Assessing the founding team is therefore vital, particularly because the investment is hopefully the beginning of a long and close working relationship. However, this creates the possibility that unconscious bias may affect decision-making at this critical point; because male entrepreneurs are in the majority, women may seem to be ‘atypical’ or ‘riskier’ by comparison.
So, if we, women, are deemed to be “atypical” or “riskier” in the first place, would we be ready and willing at our one-chance of pitching to a warm intro VC to go all out and brag? I’m not sure that I would be. Reviewing my actions so far I can say that I’m leaning way more to being realistic than bragging.
Turning the Corner
Everything works like clockwork – a warm introduction is needed to get a pitch deck accepted into the VC pipeline. The warm introduction comes through your existing network and the network of those connections. It’s the old boys club of “who you know”. Which, if I’m being honest, I’ve said that from day one of my working life – it’s not what you know, but who you know. I believe my entrepreneur parents sold this to my brothers and I as our family motto.
I’ve known for a very long time that gaining a win in life is down to who you know, but I was still stunned that in the rather formal world of lending money that it was quite so apparent. I can understand the pre-seed stage and business angel stage even, but at the VC level I was wholly expecting a more “professional” pipeline process.
To turn the corner here are my top recommendations for a female-founder business:
- Go through your Linked In connections in detail. Somewhere in that list that you’ve accumulated will be the golden ticket. Somebody you know will either be the VC warm introduction or will be connected to someone else. You need to go through each connection and be prepared to reach out to them with a solid “ask”
- Go through this list curated by Joshua Henderson: The Global Ecosystem Supporting Women Innovators and Investors and create a potential investor funnel spreadsheet. Go through each and every entry and see if there is a golden ticket there.
- Join this list on Twitter curated by Mackenzie Burnett: Investors and add them to your potential investor funnel spreadsheet. Go through each and every entry, cross reference with your Linked In connections and see if there are any connections that are 1st or 2nd connections. You’re looking for a warm introduction when you cross-reference Twitter accounts and Linked In connections.
- Don’t waste time polishing your pitch deck. Instead have a two-page Executive Summary (I have mine as a word / PDF document) that covers the main headlines: Intro; Problem; Solution; Market; Competition; Why Us; Expectations – Main header, with two sub-headers: Forecast for Year 1 and Forecast for Years 2-3; Financing Required (this also covers off: Use of Funds). This is a short summary of the main themes that can easily be sent to a potential investor and to a creative genius who can transfer this document into a brilliant pitch deck on power point – if needed.
- Go to a few pitch practice nights to see what others are doing – what are they including in their decks and what is the feedback from the panel like. What are the main takeaways from the sessions? Take those, use them to perfect your Executive Summary and full business plan.
- Create, draft, edit and prepare two different email drafts: One for a cold VC submission. One for a warm VC introduction. In either case you want and need to be ready. If you want to submit your business for VC consideration then have all of your paperwork ready. Sometimes drafting an email on the fly is your best work, other times you’re stumbling to find the right words, your mind is blank or you’re just not in the zone – on these occasions you’ll be glad you’ve prepared an email already.
- Be realistic with the pitch deck events. Be confident enough to ask the hosts questions like: what investors are attending this event? What industries are they typically investing in? How often are your events attended by investors with chequebooks? What is your ratio in female-founding businesses gaining investment? It’s not easy to ask these questions, but that is one of the issues with women in the workplace – we appear to be so grateful for the chance or opportunity that we’re just happy to be included / invited, and rather than “rock the boat” we go along with the narrative. It takes courage to buck the trend and to say – “well, I’d love to attend XYZ, but I’m being very specific with my fundraising efforts at the moment and only pitching to business angels / VCs who are investing in female-founder start ups at seed stage. Would that type of investor be attending?”
- Read this article by Parul Singh, then read it again: Raising Seed Capital It’s a brilliantly fast article taking you through some sense-checks, including “are you actually at the right stage in the raising process?” It should help you to review exactly where your business is today, and exactly what level of funding you need and from where. Getting in at the VC level might’ve seemed like the correct stage, but perhaps you’re at the Business Angel level once you’ve reviewed your “ask”. Always spend time working towards a result that matches your business stage – applying for VC funding when you’re not at that stage will, of course, result in precisely nothing.
- Research crowd funding and co-op investments options. These are brilliant ways to raise funds at the start up / seed stage and match well with female-founder businesses – if we’ve produced something (product or service) and need ad spend, marketing, team build, etc, then you will find a crowd funding platform particularly attractive – you have something, today, to sell – so sell it with a discount in exchange for a financial pledge. The co-op investment works with equity but in a similar way – offering micro slivers of equity in your business in exchange for funds. The co-op might ring-fence X% of equity, one voting share right for the co-op, and the usual shareholder features apply. You get funds upfront, lose a small amount of your equity and can get the show on the road.
- Set up a page within your website that is an “investor” focused page. Make the page very reader friendly and walk the reader through your business concept, successes / traction / client acquisition to date, details of the next stage in business, how much you need to get you there, and a contact us form. Put a password on this web-page. If and when you meet someone who asks “so, what’s your business? How much are you trying to raise?” you can give them the web link and password and leave them to read through the “whet the appetite” update. This way you’re not sending out pitch decks, financial models, business plans, or the NDAs that will never be signed. But you are giving them further details and a way to reach you if they’re interested in finding out more.
- Looking for funding to progress in business is tough and turns into a full-time role, if you let it. My advice is not to lose sight of your business and the work you should be putting into that. The more time you spend trying to find funding is less time working on your business. You will regret doing that when a strong potential investor asks you for solid numbers – how many new clients have you taken on in the past two months? What’s the average up/cross sell from existing clients? What is your automated marketing process for existing clients? How are you on-boarding new clients from free to paid model? – you can’t hide anywhere when you’re being asked specific questions and you definitely cannot say “well, I’ve been working solely on fundraising for the past two months”. That is not what you should be doing or saying. Work solidly on the business and raising funds. Dedicate part of your days work to the business and part to your investor pipeline spreadsheet. Don’t ignore one for the other.
I’ve slowly come to terms with the report and its findings. I’m still deflated that this is the reality of the female founders business journey, but I went online to the International Labour Organization (ILO) to read through some of the work on initiatives, globally, within the women in business MSME demographic and I can see just how much is being done to help female entrepreneurs and I want to be a part of that story.
I met a wonderful female entrepreneur in Vancouver some months ago, and we became friends immediately. Our first face-to-face meeting was arranged within five minutes of meeting, by sheer chance, during an online conference call. We met and discussed the state of female fundraising and just how tough it was, and we vowed to be part of the change we wished to see. We committed to starting our own investment funding vehicle as soon as practically possible – so that we could truly help women in business – and I’m going to hold her to that collaboration. Until then I’m parking my pitch deck and opting for relationship building instead – it’s who you know, after all.
*UK VC & Female Founders report, commissioned by Chancellor Philip Hammond at Budget 2017 and undertaken by the British Business Bank in partnership with Diversity VC and the BVCA, identifies specific barriers faced by female-led firms in accessing venture capital.
Michelle Caira is the Founder and CEO of Fit Mama Fitness Inc , a community contributor at Thrive Global and a certified Master Personal Trainer. Michelle launched Fit Mama, a digital platform for mothers, in 2018. Its goal is to equip women with the fitness, nutrition and mental wellness solutions and tools they need to thrive – at home and returning to the workplace. Passionate about women in business, Michelle is an entrepreneur with a global vision, and committed to help create a world where women thrive, regardless of any and all other factors.