Boosting the Odds of Securing Venture Capital and Achieving Startup Success in a Challenging Economy
Caroline Winnett, Executive Director, Berkeley SkyDeck
Women-led startups are finally on the rise – after years of venture capital seemingly ignoring their potential, 2022 has seen US VCs nearly triple the number of deals they’re giving to solely women-led companies.
According to recent data from Pitchbook, deals for startups founded only by women were up in 2022 – accounting for 6.8% of U.S. venture capital deals through August. That number was 18.6% for companies with both female and male founders. By comparison, in 2021, companies founded solely by women garnered just 2.4% of the total capital invested in venture-backed startups and 15.6% went to companies with both women and men on their founding teams. Investment in female founders is still far below where it should be, but it’s trending in the right direction.
Hopefully, the current economic impact of the Fed’s decision to raise interest rates and concern over an upcoming recession won’t entirely hammer VC investmentbecause there is clearly still work that needs to be done. However, inflation and the rising cost of capital is going to make it even harder for some venture capital firms to know just where to invest.
Even as a recession lurks on the horizon, there are some key things women startup founders will want to keep in mind heading into 2023 if they are looking to win VC investment dollars.
Design Products That Matter
It’s basic, but the three Ws often inform investment decisions. 1) What problem does this solve? 2) Who is it for? 3) Why is it the right time to start this business?
Passion, drive, and determination are all critical; every investor looks for these vital soft skills when evaluating founders. But there is no substitute for the key fundamentals of product and company development. Simply put, most investors want the whole package – a great team and product balanced with a meaningful path to success.
Create a Crystal Clear Vision That Is Contagious
In the seed phase, most founders are generally enthusiastic about their product, have a crystal clear vision, and a plan for how to execute. At some point, however, most will inevitably reach a crossroads – one at which they might find themselves asking some key questions. Are you only selling this idea to get a paycheck? Or are you hoping to achieve world domination?
A key indicator of the latter is how much others are sharing in the excitement. What traction in the marketplace has your product been able to achieve to date?
Stay Flexible and Resilient
You may find yourself in bootstrap land. It’s not the prettiest of places, but there are actually benefits. Startups that have to rely on bootstrapping are far less likely to build something customers don’t want. Scarcity of capital focuses the mind very powerfully. While there is just no way to move forward without capital for certain products – you may need to buy equipment, supplies, or lab space – but even these can often be funded through non-dilutive capital. Turn over every leaf looking for these sources. Grants. Awards. Loans. Be scrappy and don’t give up. You may need to tread water for a while but don’t lose sight of your ultimate goals.
Along the way, you may also discover the need to pivot. Don’t be afraid to consider the option and be open to the possibility that your current vision may need to evolve.
Never Underestimate the Power of Community
Twitter, LinkedIn, and other social media platforms are the virtual water coolers of the startup world. They offer no shortage of opportunities to build relationships, secure valuable introductions and engage in exciting conversations.
And while everyone knows the stories of those infamous startup founders who met in college, launched their company in a garage and then dropped out, traditional educational institutions can also be extremely valuable sites for catalyzing the things that matter. They not only provide fertile ground for identifying your passion, they also can help you build community, network, and relationships.
Case in point, UC Berkeley has a rich history in the technology space. It’s where the earliest work on RISC processors, which now power our smartphones and IoT devices, took place. It’s where BSD, which forms the basis of macOS and iOS, was developed.
Through our network of alumni, which include the founders of Apple, Intel, Tesla, and Sun Microsystems, not to mention our faculty, we’re able to make the introductions that can lead to business success. And with nearly 2000 students that attend our events each year looking for internships, our university, like many others, offers a unique talent pool.
Traditional educational institutions and social media platforms alike can also be great places to find a good mentor – someone who understands the landscape and can introduce you to potential new hires and investors, increasing your chances of success.
Ultimately, we can’t predict the future of the economy in the US. But we can see that current indicators are not positive. At the same time, that shouldn’t discourage female founders from working to secure the funding their companies need to be successful. The boldest investors have often turned economic downturns into some of their most dazzling successes – and that demands boldness from the founders looking to partner with them. By focusing on making a difference with their product, creating a contagious, yet flexible vision, and leveraging all available platforms and communities to make the connections they need to take their company to the next level, a female founder has all the tools she needs to secure funding no matter the economic conditions.
About the author
She launched the Berkeley SkyDeck Fund, a VC fund investing in SkyDeck startups that shares half of the fund with UC Berkeley. She is a serial entrepreneur, civic activist, angel investor, adviser and board member of several startups, as well as a frequent speaker on startups, accelerators, women in business and consumer neuroscience. Winnett received her MBA from the Haas School. Her undergraduate studies were at Brown University and she earned her violin performance degree at the Indiana University School of Music.