Attracting Capital to Fund Business Growth: Do Men and Women Raise Business Capital Differently?

Attracting Capital for BusinessMany businesses can’t get past the conception stage without outside funding from loans or venture capitalists, which means fundraising by the CEO, owners, or founders is necessary. According to studies, when it comes to return on investment (ROI), companies with women in top management positions show a 35% better ROI and 34% better shareholder return than those with no women.

Yet globally, recent data reveal that only 10-percent of venture capital dollars invested between 2010 and 2015 went to start-ups with female founders. Could it be because men and women approach raising business capital differently?

Gender Differences in Business

While not much research is available specifically on how men and women approach business fundraising, there is clear evidence that men and women approach many things related to business very differently. For example, men and women have different leadership styles, with men being usually more focused on command and discipline and women more focused on mentoring and coaching.

Men and women also differ in communication styles. While women are more likely to use communication as a way to create relationships and promote social connections, men tend to use language to exert a form of productive dominance and achieve visible, easily measured outcomes in business.

Differences in the Way Women are socialised

Women may actually be socialised to avoid talking about money. While the research on this issue revolves around discussing personal finances, the inability to discuss money directly could certainly hinder a business fundraising approach. Another socialisation issue centres on negotiation. Many women are typically not socialised to negotiate—rather they are socialised to accept what is offered. This may mean that they unconsciously expect their pitches will be judged strictly on merit, when what is necessary is the cold, hard financial data and some pushing on their part.

Tailor the Approach

At least when it comes to philanthropic requests, men are more likely to respond to the direct approach, while women prefer an indirect approach such as a letter or email. For women who are looking for capital to fund their business, the message is clear: go directly to the source.

Also, in business dealings, men tend to be more interested in power or authority, while women are more interested in affiliation—warm, close relationships with others. These factors can certainly affect a fundraising approach. Using language that reflects these different approaches may be helpful—for men, stress the “power” advantages like money, visibility, and status. For women, talk about teamwork and building relationships with the community or customers, and the benefits doing so brings to business.

Whatever approach you use, you’ll have a better chance of attaining success if you’ve planned your pitch and its execution carefully.

Networks Are Key

There’s no question that networks affect almost all business dealings. Those who have the same gender, social background, or ethnicity tend to be part of the same professional network and are more likely to work together. Unconscious bias (and conscious bias as well) can also affect decisions about funding. Some investors are only comfortable, for example, in dealing with women in certain industries such as fashion or retail rather than those in technology.

Also, there are some distinct pitfalls for women in networking. Kathryn Minshew, co-founder of The Muse, a job search and career advice site, found out that at least one potential investor she met during a networking event was more interested in her personally than investing in her company (she found her funding elsewhere). But she also notes that such behaviour is becoming much less acceptable, and an offender is more likely to be called to account by his or her peers.

Strategy Matters

When raising capital, it’s important to develop strategies to help promote success. For example, consider your fundraising efforts as you would a job interview, with the business plan as your resume. Do your research—why approach a venture capitalist who has no knowledge of or interest in funding a tech start-up when that’s what your business is?

Ask for feedback when you don’t get funded—the answers may help you adapt your pitch or choose different and better targets next time. Contact other businesswomen or colleagues who have been successful in their fundraising efforts and ask them to share both successful and unsuccessful tactics. Be prepared; you need excellent financial data, market information, and a good business plan.

Finally, don’t give up easily. You should expect that raising capital can be difficult and take more time than you expect. Networking remains critically important at all stages of the fundraising process, not only in the usual circles but also in many others—your funding may come from a completely unexpected source. Tap into your support network to keep you going. And don’t overlook the possibilities of joining business and professional networks, especially those focused on women such as Behind Closed Doors where you’ll find valuable insights, mentorship, and guidance that should prove useful for your fundraising efforts and in improving your business or career in general.

Donny

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