August 3, 2015 Raising Capital en_US Since 36% of entrepreneurs seeking angel funding are women, it's important to know the basics of how to attract angels with your business. Learn 6 crucial tips here. Women Entrepreneurs Get Their Game On With Angel Investors
Raising Capital

Women Entrepreneurs Get Their Game On With Angel Investors

By Geri Stengel August 3, 2015

The media has been awash with stories about the decreasing percentage of women decision-makers in venture capital (VC) firms, which certainly deserves attention. But what has gone relatively unnoticed is the dramatic rise of the number of women angels over the last 10 years. This means both women entrepreneurs seeking angel funding and women-led, angel-backed companies.

Women are swinging for the fences. An astonishing 36% of entrepreneurs seeking angel financing are women—an increase of 83% from the previous year, according to the Center for Venture Research.

On the downside, batting averages have gone down. Only 15% of all women-run companies succeeded in raising capital versus 22% for their male counterparts. Not to worry; that is to be expected when numbers jump so high. “Typically, when there is a surge in the number of entrepreneurs seeking angel funding, the overall yield [success rate] goes down,” says Jeffrey E. Sohl, director of Center for Venture Research. The 15% success rate is within the historic norms for entrepreneurs raising capital from angels.

Even with a lower success rate, more women entrepreneurs are receiving angel backing than ever before—more than one-in-four angel-backed companies were women-led in 2014. That’s a substantial 44% increase over the prior year, all due to the increase in women who are seeking funding.

It’s taken a lot of hard work to build out the ecosystem that supports women entrepreneurs. There are reasons for this, which I’ve written about at length in separate Forbes pieces, “Angels Change The Ratio For Women Entrepreneurs,” and “Angels Ignite Blazing Growth for Women Entrepreneurs, More Fuel Needed.”

But you’re probably eager to know how to improve your batting average. To ensure your team is added to the winner’s column, here are six things that will increase your odds for success.

1. Know If Equity Funding Is a Fit for Your Company

For the most part, angels and VCs invest in growth industries that require capital to scale. These include software/information technology, telecommunications, biotechnology, financial services and consumer products.

For contrast, angels are interested in industry sectors that are at least hundreds of millions of dollars while VCs want to invest in sectors valued in at least billions of dollars. All investors want to know that you have a sustainable competitive advantage, and have created barriers to entry, such as patents or pending patents, proprietary technology or systems, or something else.

What type of equity funding you seek will also be contingent on what stage your business is at. Angels are most likely to invest in the seed stages, while VCs invest in Series A funding rounds or higher. To know if your company is right for either angel or venture investment, check out this worksheet created by Springboard Enterprises, an accelerator for women-led businesses seeking equity financing.

2. Tap Existing Resources

There are now many accelerator programs for women entrepreneurs, including AVINDĒ, Dreamit Athena, MergeLane, Springboard Enterprise and Women’s Startup Lab. Want something shorter or online? There is Double Digit Academy. If you prefer to learn with both men and women, MassChallenge and TechStars have women-friendly programs. Your fellow entrepreneurs are a great resource. Talk to your peers to find out what resources they find useful. Mackenzie Burnett of Distributed Systems put together this list of angel and early-stage tech investors.

3. Have the Best Tools

You need an elevator pitch, a one- to three-page executive summary and a 12- to 15-slide presentation. Along with these, credible financials are of paramount importance. Not because investors think your projections will be spot on. They know it’s hard to make accurate projections without history. Investors are looking at your assumptions. Do you understand the metrics that will drive your business? Make sure your materials cover:

  • The management team
  • The idea, and how it fills a “must-have” need
  • The market opportunity, which must be big
  • The competitive landscape
  • The clear competitive advantage your product has over others

If you’re in an early stage, a detailed business plan is not needed. Angel investors know that the plan is going to be changing regularly.

4. Project Solid Management Expertise

The strength of your management team is absolutely critical to your ability to get angel financing as well as your business’ overall success. Angels invest in people, not just ideas on paper. They want to be sure that your team can deliver. They are looking for a management team with experience, industry knowledge and functional skills.

Angels know that the company is in the early stages of development. They also know that their money and connections may help you fill gaps in your management team. The more you have anticipated who will fill any gaps in the high-level positions needed to scale, however, the better. Even better is identifying the heavyweight you want to hire, and then securing a commitment from the heavyweight to come on board.

Advisory board members can enhance the expertise and experience of a startup’s managers. Choosing well-respected professional resources, such as accountants and lawyers, will not only expand your network but also increase your credibility when pitching investors.

5. Focus Your Search

Identifying suitable angels up-front will increase your chances of success. To help you identify appropriate angels when pitching, find out what they look for in a company, how much they typically invest and what kind of return they expect on their money. In addition:

  • Concentrate on your industry. Angels like to invest in companies whose business they know something about. Many angels, having previously been successful entrepreneurs, will tend to lean toward their prior industry experience.
  • Target investors interested in your company stage and deal size. Some angels will only invest in seed or startup companies, while others seek later stage ventures looking for expansion capital. Angel investors will have a dollar range they are comfortable investing. This can range from $25,000 to several millions of dollars.
  • Look close to home. Angels frequently want to be actively involved in your business. Make it easy for them to do so in person by looking within a 50-mile radius of your corporate headquarters. You may have to expand your horizons, but try to stick within a day’s drive.

6. Build Your Network Before You Need It

When searching for investors, the size of your network matters. The larger and more diverse it is, the more likely your business is to grow big. You’re also more likely to have investors already within your network, or at least know people who can refer you to them.

If you plan to raise money, start building these relationships at least six to 12 months in advance. Building some of these relationships can take upwards of two years, so start early.

With training and practice, when you swing for the fence, you’ll hit a home run.

For more tips on pitching and landing investors, see Intuit’s free e-book, The Complete Guide to Equity Financing.

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Geri Stengel is founder and president of Ventureneer, a content marketing, market research and education company that helps organizations reach small businesses through thought leadership. She is an expert in women's entrepreneurship and crowdfunding. Read more