Venture capital can turn ideas into successful businesses, but it composes the smallest share of funding sources. The Harvard Business Review reports that fewer than one percent of companies raise venture capital, and even that share is declining. Today’s rising startups can turn to alternative sources of funding, and the following information is just as applicable to some of those potential investors and resources as it is to VC.
The following capital resources fund far more businesses today than VC firms:
Startups are by definition untested, which makes them risky investments. To be successful, you have to show potential investors—venture capitalists, angel investors, and any other source of funding—that your idea is worth the risk. You need to prove that your startup has traction and that you have the skillset and commitment needed to see things through.
Venture capitalists and other investors do not support startups blindly. They want to know that the venture is feasible and, down the line, profitable. The following tips can help you devise a pitch that woos investors into supporting your startup.
Potential investors are unlikely to support a pitch—and others that might follow—if you waste their time with half-constructed ideas or a superficial understanding of the industry. Consider the following before you enter that boardroom:
Even the most promising startups will sink if the people behind them do not have the talent or drive to see the business through. Investors are wise to this, so will want to know as much as possible about your team before greenlighting funds.
It is important to show VCs and other investors that you have a sound business model, that you know how your venture will make money and generate profit. Part of this process is developing a value proposition that lays out how your startup would benefit customers.
A pitch deck is a brief slideshow that showcases your startup to potential investors. It outlines your idea, its marketability, its financials, and more. A good pitch deck entices your audience to ask questions and establish follow-up meetings, effectively getting your foot in the door.
Some venture capital firms and angel investors are drawn to a certain cause. If your startup falls into such a category, make sure you try to arrange meetings with them.
Getting a startup off the ground is hard. Even founders of some of today’s most successful businesses were rejected by investors several times before making it. This, coupled with the notion that most capital comes from other investment sources, underscores how important it is to pitch your idea to as many people or firms as possible.
The gender gap that persists in the general workforce is alive and well in the startup world. According to Fortune, venture capitalists invested $58.2 billion in male-founded startups (2016) while female-founded startups secured just $1.46 billion. Over all, startups founded by women accounted for less than five percent of VC deals. While this represents a larger share than in previous years, the total number of VC dollars that went to women actually declined. There’s even evidence that male and female entrepreneurs get asked very different questions in pitch settings. In general, men get asked about their achievements, ideas for advancement, and hopes (promotion-focused), while women get asked about their vigilance and the safety of investors’ money (prevention-focused).
The VC gender disparity has inspired many successful women entrepreneurs to come forward to share their experiences and advice. These mentors advise the next generation of female business owners to network, be tenacious, project confidence and to gain a firm grasp of the “entrepreneurial ecosystem.” It can also be helpful for new business school graduates or entrepreneurs to seek out other successful women as mentors.