Women and underrepresented founders are not inclined to wait for the VC industry to undergo transformation. So, what can be done in the interim?
At my organization, Village Capital, we’ve recently collaborated with the International Finance Corporation (IFC), academic researchers, and a consortium of partners to uncover ways to address disparities in how investors assess startups. Based on our findings and my experience supporting over 100 underrepresented founders, here are some tips:
Change the Narrative: During due diligence, investors often ask women-led startups more risk-related questions and men-led startups more growth-related questions, contributing to bias. Flip the script by preparing growth-oriented responses to risk-related inquiries. For instance, when asked about potential negative effects of regulations, emphasize how these regulations can also create growth opportunities for your company.
Show Confidence: You only get one chance to impress potential investors. Be confident and well-prepared. As Kimberley Abbott from Vested Impact wisely notes, entrepreneurs aren’t risk-averse; they’re risk-aware. When discussing risks, highlight the opportunities managing those risks can bring.
Quantify Progress: Investors struggle to quantify a founding team’s potential. Combat this reliance on gut instinct by tracking and articulating how your strategy has evolved over time. This demonstrates your ability to learn, adapt, and make progress on the path to growth. Mention changes based on user or funder feedback to illustrate this.
Explore Alternative Funding: Don’t limit yourself to venture capital. Consider options like grants, revenue-based financing, or loans. Esme Verity from Considered Capital points out that the startup funding landscape is diversifying, and VC isn’t the only route.
Leverage Networks: Seek out networks for underrepresented founders and connect with like-minded entrepreneurs and investors who understand your demographic or sector. Use their interest in your background to your advantage.
Participate in Support Programs: Join startup support programs tailored to your current stage. Ensure you can effectively communicate your product’s value and financial potential before seeking investment.
While these tips can help women and underrepresented founders navigate bias and improve their chances of securing investment, the responsibility ultimately lies with investors to address the broken funding system. Diversifying investment teams and creating fair evaluation processes can significantly reduce bias. We look forward to a future where the investment landscape is more equitable.
