Of all the North American companies that got VC funding in 2016, only 16.8% had at least one female founder. As veteran Silicon Valley investor Theresia Goew noted recently, the culture of VCs and tech is more sexist than it’s ever been. Even more concerning is that the venture capital model doesn’t work for a business owner who cares about more than just enriching investors as quickly as possible at any cost. Given these issues, it’s understandable that women would rather not seek outside funding for their businesses. The problems come when they start leaning on themselves instead.
Too many entrepreneurs fall into the bootstrap trap: they dip into savings, push their credit cards to the max, take out a second mortgage or get a second job. It’s a fast track to burnout and a sure-fire way to kill the business off early. It’s also not necessary.
There are many ways to raise capital, and far more kinds of investors out there (including friends and family members) than you might think. It is absolutely possible to find investors who support your dreams and will let you stay in control.
Here are the 7 things to keep in mind as you get on the road to funding your business — without having to deal with the devil:
1. Know your values.
We all have them, and there’s no reason you should compromise on yours for the sake of funding. In fact, for the health of your enterprise, you should do the opposite. Be clear on your non-negotiables. For instance, you may only want to work with fair-trade suppliers, or ethically sourced materials. You may be unwilling to give up any control. That’s fine: don’t compromise on it. It’s important to base the future on a values-aligned foundation.
2. Know your goals.
A capital raising plan is based on goals as well as values, so focus on your vision of the future: Are you planning to grow the business fast or at a slower, steadier pace? Do you want to sell the company someday or leave it to your children? Knowing these answers before you seek investors, and designing your capital raising strategy accordingly, will prevent conflicts with them in the future.
3. Target the right—and avoid the wrong—investors.
Here’s what you don’t want to do: raise money from someone who doesn’t share your vision, values, or goals for your business. The secret to successfully raising money is to make the effort to find investors who are excited to support your business on your terms. They’re out there: more than 50% of the adult population of the U.S. is an investor, each with their own beliefs, concerns and agendas. Look far beyond the traditional venture capitalist, and you’ll find them.
4. Craft an offer customized to your unique situation— with qualified help.
Be careful what you promise your investors, and know the ramifications before you offer it. Never use a generic, off-the-shelf investment agreement — and if your lawyer suggests it, you may want to find another lawyer. Work with someone who knows all of the options and their implications and can explain them to you. Then, get creative: tailor the offer to make sure it aligns with your mission and your goals.
5. Choose the right legal compliance strategy.
In the early twentieth century, the states and the federal government passed a series of regulations, known as securities laws, to protect people from investing naively. Offering an investment opportunity is a highly regulated activity and the legal strategy you choose will affect who can invest, how much you can raise, and how you can get the word out. Before making an offering to any potential investor, it is essential to choose your legal compliance strategy. There are many options available, so make sure you understand them before you choose one.
6. Reach out.
Once you know what you’re offering, who you’re offering it to, and how you’re going to reach them, go for it. But there’s no generic way to enroll investors. Some will want plenty of due diligence materials, while others go more on their gut and on their perception of your passion and commitment. That’s yet another reason to hold to your convictions from the start. Stay confident and don’t be intimidated. An investor that’s a good fit will easily see the merits of the offering, and be thrilled to say yes.
7. Don’t neglect the mental game.
No matter how amazing your business is or how great your offering, unaddressed mindset obstacles can prevent your true awesomeness from shining through. Prepare yourself by challenging any limiting beliefs that may be lurking in your mind. The part of you that wants to stay in your comfort zone will try to convince you that you can’t raise money. Thank that voice for trying to protect you and tell it that it is no longer needed. Reminding yourself of your vision is a great way to stay on track on the journey to raising the right funding for you.
ABOUT THE AUTHOR
Jenny Kassan has been an attorney for social enterprises for 22 years, and is a certified transformational coach, social entrepreneur, investor and finance innovator. Her formula for mission-aligned capital raising has helped diverse entrepreneurs raise millions of dollars on their own terms. She runs her own firm and is president of Community Ventures, a nonprofit dedicated to community economic and social development. Her new book is Raise Capital on Your Own Terms: How to Fund Your Business Without Selling Your Soul, a guide to finding investors aligned with your business goals and personal values.