Terri Maxwell, CEO, Share on Purpose
When it comes to executive startup funding, the ceiling for female executives isn’t made of glass – it’s made of paper, the paper used to make money. And if you follow the money – as in the nearly $60 billion venture capitalists invested in 2016 – the vast majority of investment dollars went to male-founded companies. In fact, men received in excess of 16 times more funding than women last year.
There are two ironic challenges that women face when seeking venture or private equity funding, because they typically operate businesses differently than men. However, these tendencies can be turned into secret weapons when women approach investors differently and VCs figure out they can capitalize on the upsides of how women run companies.
First, women are typically more conservative and less willing to tout their successes. As a result, they appear less outwardly competitive as men on the surface. Men are traditionally taught how to compete boisterously through sports and ingrained cultural expectations. They are used to swinging for the fence and promoting their ability to do so.
On the other hand, most women prefer to set more realistic expectations, not realizing that VCs factor financial projections down as part of the investment analysis. Consequently, many women find it difficult to translate their desire (and ability) to win into competitive growth strategies they can confidently and convincingly defend.
Keep in mind, VCs make financial bets before hard evidence exists that an investment is a good choice. They want to see founders with realistic expectations who also have the veracity to take calculated risks.
The fix: In order to speak in the language VCs understand, women should hire reputable business coaches who specialize in helping executives translate their business passions into profitable investment vehicles. They should also seek out coaches who can help them get comfortable with setting realistic expectations, while touting the reasons why the business idea will make money.
Second, women tend to want to do things rather than get them done. Successful male executives are masters at getting things done – not doing them. While most VCs can’t pinpoint the root cause, they innately have more confidence in male leaders. They know women are great collaborators, but they trust men more. Although this makes no sense on the surface, let’s dig a little deeper.
Whereas men are masters at getting things done (usually through delegation) women are masters at doing things, and as a result, they don’t push work and responsibilities down to their management team as quickly or effectively as men do. Taking on too much responsibility and not delegating encumbers women as leaders and is the primary reason VCs trust male leaders more in the CEO chair. They know women work hard, but they are not used to seeing women commanding teams – not only because there are too few female role models, but also because women generally are not as effective at delegating as men.
The fix: Not only should women proactively focus on leading and delegating to their management teams, they must also demonstrate these capabilities to VCs.
Three super power traits women executives offer that translate to good investments for VCs
No. 1: Conservative female leaders offer realistic projections, so VCs receive reliable data. Women tend to be more conservative, because they want to get it right. Consequently, they don’t shoot for the moon and are consistently more realistic. The realism and practicality women inherently bring to the table can be a benefit for investors, because the numbers they provide are more likely to be real and reliable. Women must own this strength, and at the same time, learn how to be more promotional in their efforts, presenting the base plan and the upside plans.
No. 2: Women are great team builders, so VCs are more likely to realize a return. Successful female leaders understand the value of team building and know how to build talented, collaborative teams. The only caveat is they need to learn how to delegate work to their management teams and beyond. That way everyone on the team is doing the work they do best and the business operates more efficiently.
No. 3: Women tend to be more culture focused than men, so VCs end up investing in companies that attract millennials. Women typically value a healthy and positive work culture more than men do. This drives them to actively build communities and connections, and ultimately build stronger and more viable cultures.
These culture-building skills will position female leaders very well in the future, because the majority of the workforce will soon be comprised of millennials who choose culture first, money second.
VCs will slowly change their perceptions and open their wallets as more women prove them wrong
Obviously, VCs want to invest in companies that will give them the best odds of making money. Female executives who can instill confidence in VCs that their ideas and leadership capabilities will deliver shareholder value will see the money first.
About the Author
Terri Maxwell is the award-winning CEO of social impact-focused business cultivator Share On Purpose and a platform of five additional companies. Terri Maxwell is a speaker, entrepreneur, venture capitalist, mentor, founder of 40 companies and global business consultant.