Q & A: Why do female founders struggle to secure investments?

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When starting her first business, Seek and Adore, in 2011, Hatty Fawcett noted how difficult it can be to secure investments.

After running the company for four and a half years, she took her career in a new direction and started Focused for Business, which help businesses prepare for and raise investment from business angels and crowdfunding. Fawcett also runs a crowdfunding accelerator, an eight-week online programme that prepares entrepreneurs to succeed at crowdfunding.

She has acquired a wealth of practical knowledge from experiences as an entrepreneur and 14 years working in marketing with several companies, including Moonpig.com and the BBC.

Over the years teaching entrepreneurs the best strategies for crowdfunding, Fawcett made another discovery: Female founders struggle to attract investment.

Solving the problem means “address[ing] the disconnect that exists between the goals of many female founders and those of the investment establishment,” Fawcett said.

Here’s more from Fawcett below: 

Q: What do you think is the perspective that women bring to securing investments that is different from how men might secure investments?

A: The motivations of entrepreneurs and business owners vary quite a lot. There are people who want to change the world, an element of mission; Those who want to create a dream, wanting to make an impact. Those are motivations I have seen in lots of entrepreneurs and founders, but particularly in women.

When you start a business it starts with an idea. You see a gap in the market, you are frustrated because you can’t find what you are looking for and you see a chance to improve something for somebody else.

That is usually the starting motivation for growing a business, not ‘Oh, I am going to go into business a make a billion pounds.’ Hopefully that is where it will go, but that isn’t usually the starting point.

 

Hatty Fawcett with crowdfunding slide 600 px wideQ: Do you think women are less likely to secure investments because they often build smaller companies?

A: I don’t think this is a male or female thing. Women are just as capable as men at building billion-dollar companies or unicorns, but I do think there is an element of choice.

To create a unicorn you are talking about exponential growth and that comes with its own set of pressures, expectations and sacrifices. You will give your life to your business. Whether you are creating a unicorn or not there is a risk you will give your life to the business.

A unicorn will be the be-all and end-all for you. There is going to be a rigorous focus on your strategy, how you are going to grow and maintain your cost base as low as you can and that drives things in a certain direction. I am not certain all founders enjoy that.

When it comes to their business, certainly women are not always just focusing on growth.

 

Q: What are other focuses besides growth?

A: For some the quality of what they are producing is really important. Other people think really hard about creating employment opportunities and the sort of people they work with, there is something around culture and employment that drives some women, and probably men too.

Women also tend to be very collaborative, engaging in partnerships and finding ways of growing businesses where the wealth is being shared out among a number of business or social enterprises.

Those have a benefit for our economy, societies and communities that is as valid as making profit, but that is not the world in which investors live. These (types of companies) are not as high on the radar because they won’t make an investor a millionaire.

 

Q: What is a possible reason for why women are less likely to secure investments?

A:  The challenge at the moment is that investors hold the money and for the most part, the investment community is quite conventional. They are looking to get a good return on their investment and the time frame is usually three to five years.

Alternative ways of growing businesses, with partnerships, may take longer than five years, because you are collaborating and working with a diverse range of people.

The investment communities focus on the three to five year window and, in order that an investor gets a return, there has to be an exit, which usually means you’ll need to sell the business effectively. That drives a particular way of operating that is perhaps not as conducive to the partnerships, the community and employment focus.

 

Q: You’ve built a career out of helping others secure crowdfunding in place of traditional finance methods, can you tell me more about it?

A: Crowdfunding is part of a growing area of alternative finance. In the UK last year £3 billion (3.7 billlion USD) were raised through alternative finance, which is not something to be sniffed at when banks are not lending at the rate they used to.

Crowdfunding has a really interesting role to play, because there are different types. There is equity crowdfunding, which perhaps follow some of the objectives and pressures with angel investing and the VC community. But there are also reward-based crowdfunding platforms, where perhaps the motivations for supporting business, creative projects and social enterprises are slightly different. People do still expect a return. You cannot expect people to pitch up and throw in their hard earned cash completely philanthropically. You’ve got to be serious about it, but the return can be different.

Even with the equity platform there is an area that is not explored, or indeed fully understood, because crowdfunding is still relatively new. Those investors might be more patient than a classic VC or a really serious angel investor. Time will tell with that, but the crowd is certainly more diverse than the VC world.

Image via VisualHunt and Hatty Fawcett

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