Janica Alvarez, the CEO of Naya Health, noticed how uncomfortable and “machine-like” modern breast pumps were and set out to re-engineer a better and more comfortable breast pump from her decade of experience in biotech research and operations.
It was a hit. She and her husband quickly raised $6.5 million from angel investors and small institutions. The more money that came in, the more she realized that scaling on a greater scope was feasible.
That is, until Alvarez approached venture capitalists.
“When it came to scaling the company and seeking funds to do so, we hit a wall,” Alvarez shared with Werk, a company that advocates for flexibility in the workplace. “Our product is unique to women.”
The male-dominated venture capital industry seldom invests in women-targeted products or in female founders (who are typically the founders of these women-targeted products).
The good news is that women control over $20 trillion globally in consumer spending, according to Harvard Business Review‘s article “The Female Economy.” That isn’t exactly pocket change. Yet, there’s a universal challenge for the founders of these exclusively female-oriented products, even when they have successfully raised money from smaller investors: They struggle to raise funding from venture capitalists. If the female consumer spending segment is so powerful, why are venture capitalists so slow to invest in female-oriented products?
Men don’t understand women’s products.
TechCrunch’s 2017 Annual Report found that at the top 100 venture capital firms, 8 percent of partners were women, which inevitably harms the female founders who are pitching. If more women were at the table, they could advocate for the value of women-oriented products.
Heidi Zak, co-founder of women’s underwear company ThirdLove, shared her experience on Quora: “I show up to this meeting with my husband, Dave, who also happens to be my co-founder. We give our pitch and feel pretty confident. Then … the guy gets up and says: ‘Sorry, but we only invest in businesses we understand.'”
She goes on, “His company invests in blockchain and data analytics, but he only invests in things he understands?”
“Let me ask my wife.”
Oftentimes, after pitching a product for women, the venture capitalist will comment that he has to ask his wife what she thinks of the product because of his lack of understanding.
Venture capitalists rely on trusted female consumers who can tell them, truthfully, if it’s a product worth investing in — wives, daughters, and sisters included. This is how Sara Blakely got her start with Spanx. A hosiery mill operator had initially told her no, then called back a week later to say he was on board. His daughters had changed his mind. He had mentioned the product to them jokingly, thinking it was crazy and expecting them to laugh along with him. His daughters weren’t laughing. They advised him that it was genius.
This lack of understanding of women-targeted products doesn’t hinder only female founders. Brown graduate Dan Aziz founded prenatal supplement startup Premama, and while he has been able to secure a few rounds of funding, he told me he also encountered confusion at male-dominated venture capital firms, at which all of the venture capitalists had to ask their wives their opinion on his product.
So, we know men value women’s opinions and their products, even if they have to consult other women to appropriately understand. But how do we ensure women can receive more funding, even if they are pitching a women-targeted product?
1. Numbers rule.
These numbers include market opportunity, anticipated market share, profit margins and most of all — proven traction. If you can prove that you can make your investors a pretty penny, it will be a no-brainer — even if they don’t necessarily understand your product. Think about it: The Spanx hosiery mill owners didn’t understand Spanx any better just because his daughters confirmed it was a great idea. He simply needed confirmation that the intended market needed it, and that his investment of time and resources would pay off. Alvarez’s interview with Werk and my conversation with Aziz proved the same: Numbers speak volumes, and should remain central to an effective pitch — especially when they prove market need.
2. Prove your credibility.
While it’s true that your alma mater’s pedigree is a typical signifier credibility — even more so if you have a technical background or an MBA — there are other ways to prove credibility that go beyond the resume. Remember that, given your immense amount of research in your target market and around your product, you are a certifiable expert in the space. Focus on markers of this niche expertise. Why are you equipped to lead this company? What unique experiences have propelled you to its creation? Focus on your team’s experience in your industry specifically — because you could not build a company from scratch if you weren’t an expert in it.
3. Harness the power of networking.
Before you even get into the room to pitch, invest time talking with everyone you can in your industry of expertise. This does not necessarily mean to network only with other women, if you have a women-oriented product. For example, if you own a line of athleisure apparel for women, get involved in the fitness space. Show up to networking events and share the details of your product. It makes others remember you and what you’re doing — and they (men and women) are likely to help. Chances are, someone you meet will know someone in venture capital who may be interested in the investment opportunity. Putting yourself out there is key to securing those warm leads — and if you get in the door by an introduction, you’ll already have a greater sense of credibility with the firm.
4. Do your research.
There are hundreds of venture capital firms, and they all specialize in different industries. Narrow your focus. Research companies similar to yours, and take note of the venture capital firms that have invested in them. This makes the race to raise money more pointed, and also ensures you can walk in the door and say, “I noticed you invested in products like mine before … ”
5. Perfect your presence.
We can all benefit from being cognizant of our presence. For a while, there was a line of thought that the more passion an entrepreneur conveyed in his or her pitch, the more likely the venture capitalist would be to invest. Harvard Business Review shared research from Lakshmi Balachandra, a PhD student who has extensively researched the interaction between entrepreneurs and venture capitalists. She found from analyzing 185 pitches at the MIT Entrepreneurship Competition that it’s actually a calm demeanor that sits well with venture capitalists. Upon further research, it appears that someone who appears calm and calculated confers a greater sense of leadership.
Body language helps, too. Amy Cuddy’s book Presence: Bringing Your Boldest Self to your Biggest Challenges asserts the power of expanding your body: “Since we naturally expand our bodies when we feel powerful, do we also naturally feel powerful when we expand our bodies?” The answer is yes — and this link between feeling and embodying provides not only additional confidence when you’re standing up there pitching, but awards you an air of power and esteem to those listening to your pitch — from your body language alone. So shift those shoulders back and feel your powerful presence emerge. It’s in there, and will prove your product’s investment opportunity without any insight from someone’s wife.