On Saturday March 5, I will moderate a panel at the Speak Up Women conference, held at the United Nations in New York. The discussion will center around the spectrum of financing options available to new businesses, including crowdfunding, angel investing and venture capital, and how to go after the right options for your company.
Joining me are Geri Stengel, a frequent Forbes columnist and contributor to the upcoming book, Impact with Wings: Stories to Inspire and Mobilize Women Angel Investors and Entrepreneurs, Jeanne Sullivan, Co-Founder of StarVest Partners and Advisor to Astia, and Laura Fredericks who is Founder and CEO of THE ASK and author of multiple books on asking, raising, and managing money including her newest title, Money Wellness: Is Money Making You $ick?
In a preview of our Saturday discussion, I sat down with my fellow panelists to talk about some of the issues we hope women entrepreneurs consider when approaching fundraising.
KKT: Geri, as an expert in crowdfunding, what excites you about how new business owners can use it?
GS: Rewards-based crowdfunding via sites such as Indiegogo, Kickstarter and Plum Alley are an exciting, relatively new way for startups and growth companies to raise capital. The benefits include:
- Accessing debt and equity free capital. You don't have to pay interest on a loan or give up a piece of your company.
- Providing insights into what features, communication messages and even pricing will resonate with your market.
- Demonstrating to future investors that the market wants your product or service.
- Engaging customers in the development and marketing of your product.
- Financing that is appropriate for most companies at virtually any stage.
KKT: Why does crowdfunding speak to you and why do you want women to know about it?
GS: It's no secret that women have a harder time raising money for their businesses than men. What is a secret is that women entrepreneurs outperform their male counterparts at raising rewards crowdfunding. Research reveals the reason why: women are great communicators connecting at an emotional level through storytelling. Based on my own observations I'll add, women are persistent and excellent project managers. Both are essential skills in succeeding at crowdfunding.
I'm also a fan of equity crowdfunding. It centralizes, streamlines, simplifies and shortens the fundraising process for both the entrepreneur and investor.
KKT: Jeanne, you have helped entrepreneurs at every level of the game. When you advise founders, is there a stage of development you want them to focus on the most?
JS: I enjoy the opportunity to support entrepreneurs by outlining the right "tools" required to get the financing in place with an angel or institutional investor. Business owners often need help to articulate their product or service. They need a solid, pithy executive summary and a short "deck" that tells the story. Who am I as CEO and who is my team? What are our credentials and track record? How do I best proceed and find the "right" investor that has a passion for my business and will be supportive as I build the business. Having the right tools and guidance via advisors can help create the success needed in these early days.
KKT: Where do you think entrepreneurs are most blown away by their fundraising expectations not meeting reality?
JS: The difference between a seasoned entrepreneur and a first-timer is the ability to aptly discuss "the business of the business." Often entrepreneurs are in love with their product or service and talk way too much about the features and functions.
A serious investor wants to understand the product or service and the "use cases" but we want to understand how you will scale the business. What are the programs and plans that will lead to quarter over quarter revenue growth? What is the marketing plan? What is the sales and distribution plan? Will you use a direct or indirect sales channel? How many "feet on the street" will be needed to prime the sales pump?
The experienced entrepreneur knows how to discuss the financials of the business: The financing plan, valuation of the financing, the capital needs over time, the drivers that will build revenue. Most investors do not believe these numbers but if they are somewhat rooted in realism, the entrepreneur may succeed in getting the required funding. The ability to discuss these areas with knowledge and facts along with passion and vision will make the difference with an investor.
KKT: Laura, you've help business leaders focus on asking the right questions, especially around fundraising. Do you see entrepreneurs asking enough questions?
LF: Entrepreneurs lead first with explaining their concept, idea, product and ask questions second. They need to do a reverse - ask good questions first - then based on the answers weave in how they can be that natural partner; how their product can escalate joint business; and why they selected this person or this company to share their ideas for prospective business.
Good questions to ask are:
- "I recently read that you really set out to only fund local eco-friendly businesses then expanded state wide? Why did you make that strategic decision?
- "How did you come up with the idea for this app? There are zillions of apps yet your stands out and it is used by a wide demographic range?
- "There are over 1.4 million registered charities in the US alone. What motivated you to start your own? I feel there is so much I can learn from your experience.
KKT: Is there a certain stage of company development that is particularly ripe for asking key questions?
- Who to ask?
- When to ask?
- What to ask?
- How much to ask?
- How to anticipate the answer to your ask?
- How to follow up until you have a definitive answer?
- How to steward that investor; partner; or company for your next round of funding?