The numbers are daunting: 540,000 new businesses launched each month in the United States; only 1 to 4 percent of start-ups that pitch to investors actually get funded. More than 31 percent of small business owners reported no access to capital in 2016, a situation considered largely unchanged today.
It is some of the sobering content of Crack the Funding Code: How Investors Think and What they Need to Hear to Fund Your Startup. Its author, funding expert Judy Robinett, contends money is out there, but many entrepreneurs don’t know where to look for it or how to convince investors to take a chance on them.
The hunt has been even tougher for women in an investor community that skews heavily male, she said.
That’s why Marc Kramer, executive director of Private Investors Forum, invited Robinett earlier this month to be the keynote speaker at the nonprofit’s annual investor-access event in Philadelphia, the Angel Venture Fair (AVF). You can listen to her talk here. The 66-year-old resident of Idaho is an entrepreneur, investor, and longtime corporate leader who serves on a number of investment advisory boards.
The night before AVF, I interviewed Robinett at an event held by the Private Investors Forum for women entrepreneurs at Venture Café in University City. The conversation has been edited for clarity and space.
So why do you call this the Golden Age of fund-raising?
In the United States there are 400 angel groups. Even the sovereign wealth funds, these are government-based funds, they now manage $8 trillion and even these groups are investing in start-ups. There’s [also] 4,000 family offices around the United States and they are actually seeing more deals than the venture capitalists. Venture capital hit $132 billion this year. So there’s really no lack of funding. There’s $317 trillion of private wealth.
And what we’ve seen now is a lot of women have had successful exits and they’re investing. And many of them are starting their own funds. There’s now 90 funds in Silicon Valley that are just looking specifically for women founders.
You cite in your book the three “C’s” that get start-ups funded. What are they?
The first is coachability. Angels in particular want somebody who is willing to learn. As soon as you come across as a know-it-all‚ you’re going to be marched out the door. Confidence is No. 2. You have to be confident because you’re going to have to go find customers. You have to have a level of confidence also to get the funding. And then the third one is character. Howard Stevenson, known as the “lion of entrepreneurship” at Harvard, said the first time he hears a white lie or an exaggeration, he knows his money would be flushed down the toilet.
What are some of the keys to successful pitches?
Be concise, be compelling. Be really clear on your exit, because investors want their money back. And mitigate risk as viewed by the investor. The investor wants to know that you can build a business, who your competition is, your go-to-market strategy.
The one way to get funded very fast is to already have a paying customer. And it has to be more than just your friends and family. And then if you show the ability to scale. How quickly you can grow, that’s really significant.
What is your advice to divert gender-bias in pitch sessions and forums, such as questions like, “Are you married?" “Do you have children?”
I’d go to a different angel group.
Besides your book, what resources do you recommend for entrepreneurs?
Brad Feld out of the Foundry Group writes a phenomenal blog. Fred Wilson of Union SquareVentures is a prolific blogger. I would recommend go locally to your SBA, your Small Business Development Center, SCORE, they will help you develop your pitch, your narrative, do a market analysis, all for free.
How has social media and digital helped with raising funds?
One thing that stands out is crowdfunding. And the good thing about social media is you can find anybody anywhere. Almost all the venture capitalists will answer you if you tweet them. So, it’s really good.
When you are starting out, what is the process for getting to funding?
Start building relationships with the angel groups, potential investors so they know you. Many of them will tell you when it is a fit to come and present.
Are there geographic considerations to seeking an investor?
Seventy-five percent of angels invest locally in the state that they’re in. That really is critical.
How important is a social mission to an investor?
It’s becoming more so. And I think part of this has to do with the amount of women who are getting involved.
Dana Donofree of Philadelphia’s AnaOno LLC described you as a badass. Do you consider yourself a badass?
[Laughing.] I don’t think so. But when somebody tells me it can’t be done, I’ll figure it out. That’s what got me into this. I was so frustrated, particularly with women and minorities not getting funded. I was tired, honestly, of the prejudice. So, I’m 66. When I was in my 20s, I didn’t think we’d be dealing with this. I didn’t think it would take this long.