Ok hautrepreneurs aka female founders, let’s talk about funding. Well five minutes worth anyways, I want this to be a quick informative post and I know how crazy your schedules are as rising fabulous CEOs. This is the first in what will be a series on funding - so let’s get to it.
Funding your company can feel like the most daunting task if you want to launch into a new venture. And it seems especially challenging if you try to do it without a rich parent, family inheritance, lofty savings or access to a huge circle of influence. And lets be clear ALL of those does equal an advantage. It feels like all anyone talks about is venture capital investing these days. As our pals at Investopedia. defines it, venture capital funds are investment funds that manage the money of investors who seek private equity stakes in startup and small - to medium-sized enterprises with strong growth potential. These investments are generally characterized as high-risk/high-return opportunities. But if you have done your homework, you know that women receive only 2% of this type of funding.
And if you are a women of color you receive even less. Although we are getting some #blackgirlmagic encouraging moments like this VanityFair article - last year, naming some 26 brilliant women who have raised funds beyond $1mm, due to the fact they can be named in one article means we STILL have major work to do.
We’ll get into the details laters about Venture Capital Funding, but for now, let’s start with the most talked about ways when you are in super early launch also known as seed funding...
Bootstrapping your company is what we mentioned in the intro, where you utilize your finances to start your company to purchase supplies, resources etc. and use the incoming sales to fuel the progress of your companies’ finances and purchases. An average bootstrap investment is $10,000, so if you aren’t able to muster up those funds, well, keep reading. If you are one of the lucky ones who has slaved, saved, had side hustles to raise it doing ebay and whatever else, then make sure you set a good budget, try to cut down on extra non essentials and get going.
A Sou Sou, is a savings arrangement where a group of people each pool an equal amount of money for a period time (month, two weeks, etc) and after that time is up, one person in the group gets all that money. They keep doing this till everyone gets their turn and receives that full lump sum at least once. [#thanksurbandictionary] This is a common fundraising activity popularized from Caribbean and African immigrants and its brilliant. If you can find 5 – 10 trusted members to do it – go for it, it will take you one less credit check but the money will be distributed based on your circle. I first learned about sou sou when I lived in New York City and almost all of my Caribbean friends had successfully joined a circle or two. And a few of them launched their own companies with it – debt free and with the help of their community.
An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. Often, angel investors are found among an entrepreneur's family and friends. This is a little bit of a cheat since technically you would have a circle of influence to network and find members that are Angel Investors. Angel investing is a great way to fundraise but be warned that it means you may need to become a more sophisticated founder, providing monthly updates, reports and strategies to your investors. Amounts invested are usually from $50,000 to just under a million.
Friends and Family Round Investing
This type of investment is similar to Angel investing but the difference is you know everyone who wants to invest in your company, you avoid a credit check and . Payback to your investment varies with this type of fundraising. Payback options could include – paying back all funds, a piece of equity or not paying anything at all. There are some cons to “F&F” investing however, if your members are not comfortable with the risk, this might put you in an awkward position that adds not only additional stress but weighs on your relationships if they lose their money at the end of this venture.
Wow – we already have gone through four paths already, lets check out the remaining three on Part 2 and review pros and cons to each. Until then …
Stay fabulous and femalefueled!