Clearing the Hurdles: Women Building High-Growth Businesses

CHAPTER 6•FINANCIAL KNOWLEDGE AND BUSINESS SAVVY 133

What Can Women Do to Clear the

Financing Hurdles?

To Overcome Any Shortfalls in Initial Funding

Build Personal Reserves

The earliest investments will be your own and those of your

cofounders. The more cash that you can set aside for the early-stage

development of the business, the stronger the position you will have

when you seek outside investors. Use the time before you start up the

business to cultivate your network of business and professional con-

tacts who can assist in the start-up and development of the business—

either directly as partners, investors, clients, or customers, or indirectly

as references and conduits to other interested partners.

Consider Founding with a Partner or a Small Team

Most complex businesses are created by small teams of entrepre-

neurs rather than by individuals. Consider your goals and your capabil-

ities, then organize a founding team with multiple talents and resources

and draw on the shared pool of financial resources to get the business

off to a flying start.

TABLE 6.2 Sources of Equity Investments

Sources of Equity

Private investors—individuals or groups 93%

Bank where you had debt 8%

Venture capital firms 50%

From pension funds/insurance companies 5%

Publicly issued stock 5%

Investment from a small business investment corporation 8%

134 CLEARING THE HURDLES: WOMEN BUILDING HIGH-GROWTH BUSINESSES

Creatively Finance the Business to Show Proof of Concept and

Capability for Growth

Women must raise their initial capital creatively, including using

bootstrapping techniques. Bootstrapping by minimizing capital

requirements can enable the team to demonstrate product viability,

build market interest, and prove management capability. That level of

success already achieved is the proof that enables women to take the

next step and engage debt and equity investors. The Springboard sur-

vey results provide a good comparison of women who were successful

in securing outside equity investments and those who were not. What

the winners had in common was their ability to bootstrap the early

stages of growth. The personal savings of the start-up team funded

90% of their ventures in the early stages. The next most popular strat-

egy was delaying compensation for the founding team to help build the

business (73%).

However, there were distinct strategies that differentiated those

ventures that succeeded in getting equity investments from those that

are still trying. Among these are bootstrapping options that use “other

people’s money” (i.e., customers, vendors, and employees) and control

resources the business doesn’t own (e.g., leasing equipment). Boot-

strapping was critical for positioning the businesses for subsequent

investment by external investors; a well-disciplined financing strategy

increases the chances of the firm’s later success and increases the ven-

ture’s access to outside investors. Women-led businesses that use boot-

strapping as part of their financing strategy are more likely to be

successful in securing equity financing. These women have been able

to demonstrate the success potential of their businesses while develop-

ing greater skills as leaders.

If women have not had the opportunity to learn how to plan and

execute bootstrap financing through firsthand industry and start-up

experience, attending programs to learn about these options is advis-

able. Leading a fast-growth business is challenging. Bootstrap financ-

ing is essential to getting off to a good start.