Every entrepreneur faces an uphill battle, but when you listen to female founders talk about their early days of seeking investment, you’ll hear subtle refrains that may differ from male founders in telling ways. “I wasn’t spoken to in the meeting, even though it’s my company.” “The all-male investors had no idea why women would want our female-focused product.” “I was the only woman in the room.”
Karen Cahn set out to change the conversation. Connecting women with the capital—and the knowledge—they need to launch companies is, quite literally, her business. As the founder and CEO of iFundWomen, a crowdfunding platform for female entrepreneurs, Cahn has witnessed myriad female-owned companies find the money necessary to grow their businesses. It was an idea born of necessity: When it comes to starting a company, says Cahn, “most women will tell you that access to the actual capital is the No. 1 barrier.”
In the United States, women own upward of 11 million businesses, which account for about 40% of all national businesses. Like their male counterparts, female founders secure funding in ways as varied as the businesses they create, like raising capital from friends and family or using credit cards to get a company off the ground.
Here’s how four female founders got the money to launch their businesses, and the biggest lessons they learned along the way.
Startup Lesson No. 1: Start Lean
When Lynn Le first had the idea for her company Society Nine, a brand focused on women’s boxing gear and apparel, she had a $50,000-a-year salaried job. Le, who was also teaching kickboxing at the time, had many female students ask her where to find better-fitting gloves—ones specifically designed for women’s hands, not just a smaller version of men’s gloves. A business was born.
For 18 months, she used her own money (along with credit cards to cover living expenses) to invest in prototypes, buy samples, hire contractors and build a small cushion of savings. “I was waiting for some sort of sign of life,” says Le of the business. “Some sort of funding that wasn’t me.”
Funding eventually came in the form of a $15,000 grant from the city of Portland, OR, where Society Nine is based. Le quit her job. “The grant meant I could put my time and energy fully into getting Society Nine launched,” she says. The $15,000, however, didn’t go far. She had to make smart—and frugal—decisions to get to the next funding phase: a Kickstarter campaign.
She stuck to the essentials, like legal paperwork, prototypes and registering a trademark. “I bootstrapped because that was what was needed,” says Le. And when the Kickstarter campaign proved a success, Le had found her calling card. She spent a year wooing, and finally securing, angel investment. Years of building the business with her own money had paid off.
Startup Lesson No. 2: Have Traction Before You Seek Funding
There’s a reason that iFundWomen’s model includes coaching on how to start a company: Cahn knows all too well the missteps fledgling entrepreneurs make. When Cahn launched her first startup—a video-sharing platform aimed at women—she was eager to use her extensive social network from her previous career at major tech companies. “For two years, I made every first-time founder mistake,” says Cahn, who is based in New York City. “Because of the people I knew, they wanted to hear my idea. And it was a spectacular failure because I had an idea and I didn’t have a platform, I didn’t have traction, I didn’t have a product. There was a venture capital path that I was not ready for.”
Christy Cook, founder of Teach My, had a similar experience of being judged to be “not ready”—albeit in a much more public setting. Cook, whose Toronto-based company makes learning kits now sold in major retailers across North America, appeared on a Canadian reality show where entrepreneurs seek funding for their early-stage companies. With just six months of business under her belt, the judges thought Cook needed more sales to prove the merit of an idea they otherwise supported. She didn’t get any funding.
She was, however, ready to take advantage of the silver lining: “The TV show proved to be very fruitful,” says Cook. “I secured many relationships with toy stores, and in my opinion, the show really put Teach My on the map.”
Likewise, Cahn turned failure into success when her first company was flailing. In making what she calls a “Hail Mary” effort to save the business, she turned to crowdfunding—and quickly realized that crowdfunding was her business.
“We discovered crowdfunding should be the first stop on every entrepreneur’s journey to prove demand before you invest in supply,” says Cahn. It’s all too easy, she points out, to build a product nobody wants, take on investors too early or rack up credit card debt. With the idea of debt-free capital in mind, iFundWomen was born. “Failure just means you’re learning,” says Cahn.
Startup Lesson No. 3: Be Prepared to Scale
Gabrielle Melchionda’s natural body care company, Mad Gab’s, based in Portland, ME, was the very definition of a lean startup: “My first funding was $53 from a waitressing pouch,” says Melchionda, who started selling homemade lip balm to natural foods stores while still a college student in the early ’90s.
A few years later, her side gig was about to evolve into a true small business. That’s when Melchionda got valuable advice from a work colleague: Mad Gab’s had potential, he said, but it wasn’t ready if opportunity came knocking. He advised Melchionda to build out fully developed business plans and, crucially, to know exactly how much money she would need to borrow to get the company off the ground. Melchionda took the advice and ran the numbers.
She returned to that well-thought-out plan later on, when she nabbed a highly competitive spot selling Mad Gab’s on the television network QVC. She had no money and only a bit of the inventory she needed—and would have a strict timeline to deliver anything she sold. But because she had a business plan, financial projections and a purchase order from a reputable seller, she was able to secure a loan from a community development corporation. With that, she was able to get the inventory and staff she needed to complete the QVC order. QVC warned her that any unsold inventory was her own responsibility.
She sold out.
Startup Lesson No. 4: Seek Out the Money That’s Looking for You
With crowdfunding platforms—such as Kickstarter, which Le utilized to get Society Nine off the ground, as well as the women-focused version Cahn runs—opportunities to find capital now exist that weren’t imaginable 10 years ago. But there are also more traditional entities seeking out women-run businesses to invest in. As Melchionda points out, Mad Gab’s appealed to the community development corporation that invested in her for many reasons: The company was a woman-owned microbusiness with an environmentally friendly and sustainable business model. For the investors, Mad Gab’s ticked several key boxes.
But even if investors aren’t looking for you, opportunity may still exist. As Cook knows from experience, some large retailers seek out woman-owned businesses when looking for new product. In 2014, for example, Teach My was picked up by Walmart. “They were running a marketing campaign focusing on women-owned companies,” she says, “so my business was a great fit.”
Startup Lesson No. 5: Don’t Just Get Money—Get Support
For Melchionda, the investment money yielded far more than a loan. “It helped me feel like I had people in my corner,” she says. Coastal Enterprises Inc. provided her with counselors, support groups and workshops to help her business to flourish. “Borrowing money from someone who cares about your success—and they have resources for you—makes you more comfortable with the risks you’re taking,” she says. From that initial investment for a QVC order, Mad Gab’s went on to secure a line of credit. Nearly 30 years later, Mad Gab’s is still going strong.
Likewise, Cahn sees immense value in connecting women with support—not just money. Indeed, iFundWomen touts the platform’s coaching and community facets as essential elements for success. But however you do it, Cahn advises, don’t go it alone. “Impartial mentors and coaches can help you connect with other people in your industry and with people skilled at things you’re not good at,” she says. “You need other humans who have been there and done that."
Julie Anne Russell is a Brooklyn-based freelance journalist. She writes on personal finance, small business, travel and more.
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