10 signs your female founder led business needs investment

Less than 3% of VC investment goes to women-led businesses, yet women start one in three businesses in the UK, and they have serious potential for success. Female led businesses generate 10% more revenue, deliver double the return on investment for their financial backers, plus only 23% fail as opposed to 34% of male led businesses. So, if that’s all true, then why are female founders struggling with investment? 

Not enough females are scaling their businesses. In fact, £250 billion of new value (equivalent to 1 SME million businesses) could be added to the UK economy if women started and scaled new businesses at the same rate as UK men.

This untapped potential is so great that it’s important we take the time to dispel some myths surrounding equity investment.

Funding is vital for many high growth potential businesses - it’s hard to scale without cash to support your growth. Ensuring you have enough to rocket fuel your growth can be the difference between success and failure. This is something our own female founder community knows only too well - in a recent poll we ran on our Female Founders Fly group, our members told us that money is the one thing they need more of in their businesses.

But how do you know if investment is critical for your own start-up success? What are the key triggers to look for as a catalyst for seeking equity funding? 

Sign #1 - There’s pent up demand for your product, but you can't reach customers effectively because you have no sales or marketing budget.

Without investing in sales and marketing, it’s going to be extremely hard to grow a business effectively. Whilst organic growth can work sometimes and is great at the very beginning, it’s unlikely to be all you need to build a high growth company. If your business is already growing and there’s a distinct demand for your products or services, yet you feel you don’t have enough cash to put together a complete marketing strategy, this is a good sign you’re ready to consider your funding options.

Sign #2 - You're a marketplace business and need to attract a critical mass of audience to succeed.

Raising external investment will probably be required if you’re a marketplace business and you’re looking to get on the growth ladder. That’s because a marketplace has both buyers and sellers, for example, Airbnb, which has those letting their properties and those looking for somewhere to stay. Ultimately, you need enough people on both sides of the equation to generate success. Acquiring customers rarely comes for free, so brand awareness is key. You’ll also probably need to build your marketplace before you acquire customers, and so external funding may be critical.

Sign #3 - You need to hire great people, but you can’t afford it.

This is a Catch-22 situation and it may mean that you're ready to start your fundraising journey if you’re looking for highly skilled people to take the business forward. You may work 100 hours a week, getting caught up in all the different areas of the business that you really ought to delegate to those who excel at those things. Funding your team is a priority and whilst you may be fearful of the hours in the day that fundraising could take, it’s an important next step and you can get support.

Sign #4 - Having the right technology can be a game changer, whether you're a 'tech' company or simply tech-enabled.

So many companies these days have technology at their core. The quality of your tech can actually mean failure or success. R&D credits and grants may be options to fund technology, but you can’t claim this money until you front the initial investment. Counterintuitive much?! Securing equity financing can be a good option if you have an attractive business built around innovative technology and can prove the ROI for investors. 

Sign #5 - Are you looking to get to profitability sooner rather than later?

Once you turn a profit, you become self-sustaining. Hurrah! But, it's hard to get there. If you’re a product business, it’s likely that your unit costs will be lower when you have larger order sizes, giving you a higher margin. Raising investment can help certain businesses lower their costs and get to profitability quicker. It’s not for everyone, but it can rocket fuel some companies. Work out when profitability should hit and how much investment you might need to cover the shortfall. 

Sign #6 - Do you need a cash injection to fund operational requirements?

There can be quite a significant lag with a business’ outgoings and getting paid by customers. Larger cash injections through equity funding can not only cover operational cash requirements but also help kick start growth. With a good markup, you can achieve a profit, but you’ll have a lot of costs to cover during the gap between buying the product and selling it to your customers. You may have a few options for funding, such as bank loans, but equity funding could give you much more cash to grow your business faster.

Sign #7 - You may want to capture market share and do it quickly!

It’s called first mover advantage and may be the key to success in many industries. Beating your competitors to it often means pushing for growth over profit. A lot of successful start-ups take this approach, e.g. Facebook and Uber. The only way to fund this type of market share is through equity fundraising. It will be extremely hard to get it elsewhere at such an early stage.

Sign #8 - Building innovative and unique IP can be expensive and may mean your business needs investment up front. 

Do you have really innovative and unique intellectual property? Copyrights and trademarks can be really costly. Typically, if you’re developing IP, you’ll need equity funding to help you along. Some of our Fundraising Stories podcast guests in this category include the incredible companies Secret Saviours, Built ID, Grow Up Urban Farms and Loowatt. If your IP is at the heart of your business, fundraising may be right for you.

Sign #9? Do you have competitors? Do you need a competitive edge?

Most likely, yes, and if you don't, you’ll probably have them at your heels soon. Investment can help you get ahead of competitors. Having an edge and a great marketing story will help. It’s impossible to compete without money. Once again, consider equity funding if there’s not enough cash in the bank.

Sign #10 Is it speed... that you’re looking for?

More fuel = faster results = a higher return. Instead of growing slowly, you might consider scaling to sell the business, moving onto another venture or... Anything else. It’s as simple as that!