So You Think You Need An Investor?

As we are on the cusp of shooting Shark Tank Series 3, I thought it was time to reflect on an important topic: Sometimes an investment deal, in reality, is not the best thing for a business.

It has been reported that there is marked gender differences in the ability to raise funds. Here are some interesting statistics: “Women start companies at twice the rate of men. Female-founded companies get only 13 percent of the total angel financing available.

According to a study by First Round Capital companies with a woman on the founding team outperform their all male peers by 63 percent. But when it comes to venture capital often the speediest route to building a fast growth company – women are not getting funded. Female CEOs get only 2.7 percent of all venture funding…” according to Inc Magazine.

Mashable had an article appear earlier in the year which claimed that Shark Tank USA funds fewer women, and for lesser amounts. I question what sits behind this – ‘Is this an unconscious bias or are there other contributing factors?’  Is it the case that the women ask for less? Is it that there are fewer women pitching? I will have a keen eye this season and will be doing the numbers. One thing I have often noted is a woman may well pitch her business by telling you all the things she is yet to do… whilst a man will tell you all the things he has already done.

We do not know how many women did/did not ask for funding to those VCs. A VC friend of mine laments that she never sees women come to pitch. Perhaps it is the fact that they are boot strapping that is making them more successful. Do they have more of an incentive to make their business scale? Maybe this is why women founders are 63% more successful.

What I do know is that getting an investor on board is not necessarily the ‘right’ thing for every business… and that is not biased to either gender.

It has been confirmed by research that flexibility and control are considered the real benefits of being your own boss. Founders are not unaware of the risks, that 60% of business startups fail, but, on balance, founders prefer the life of entrepreneurship.

The moment a self-employed individual takes investment, they are by definition no longer ‘self-employed.’ They now have responsibilities not just to their customers, but to their investors as well. There is also significant compliance, governance and fiscal responsibilities that come with the investment, not to mention the budgets, performance indicators, and regular reporting.

I’m glad for Scale Investors and Golden Seeds – because they understand that there may be subtle differences in how female founders work.

I know I started RedBalloon because I wanted to be in charge of my own destiny… the business model allowed us to bootstrap the business, and be accountable only to the customer. But is that a gender thing… I don’t know. Thoughts?

[This post by Naomi Simson first appeared on the official website and has been reproduced with permission.]

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