Part of Kathy Caprino’s series “Leading Entrepreneurial Success Today”
According to the latest estimate data on female entrepreneurship, more than 11.6 million firms are owned by women, employing nearly 10.1 million people and generating $1.8 trillion in sales (as of 2018). But only one in five businesses with revenue of $1 million or more is women-owned, and only 4.2% of all women-owned firms have revenue of 1 million or more.
Another statistic reveals a stark trend—women-led startups received just 2.3% of VC funding in 2020. What contributes to this inequity of funding distribution, and how can women-owned businesses achieve a far stronger share of VC funding going forward?
To explore this phenomenon in greater depth, and to understand what helps female entrepreneurs thrive at a higher level, I caught up this month with Pat Hedley, investor, advisor and author of Meet 100 People: A How-To Guide to the Career and Life Edge Everyone’s Missing. After a nearly 30-year career with global growth investor General Atlantic, Hedley is now a private investor and advisor to growth companies and a passionate advocate for intentional and generous relationship building.
Hedley takes on advisory roles with growth company CEOs focused on growth acceleration and value creation. In addition, she speaks regularly at colleges, alumni groups, growth companies and corporations on the importance of networking for professional and personal success.
Here’s what Hedley shares–about the power of networking to build confidence and create connections and opportunities that can dramatically elevate our work and entrepreneurial ventures.
Kathy Caprino: Pat, what is the state of female entrepreneurs today and where are you seeing the largest challenges?
Pat Hedley: According to the Census Bureau, women-owned businesses made up just under 20% of all firms employing people in 2018 but the numbers keep improving. Women start businesses at five times the national average and generate $1.8 trillion in annual revenue.
Still, female entrepreneurs only get a fraction of the funding of their male counterparts (2% of venture funding) and therefore female-led businesses don’t have the accelerants needed for rapid growth. Access to capital is what allows entrepreneurs to innovate, add talent and build businesses of scale. Female entrepreneurs tend to excel at working in their businesses, but capital gives you the flexibility to work on one’s business and scale it. The majority, about 95%, of female-led businesses, remain under $1 million in annual revenue and that has to change. Recent successful IPOs of four female-led businesses in 2021 are good bellwethers for changing these disparities, but there is a long way to go.
Caprino: Why is networking so important for entrepreneurs generally, but especially for female entrepreneurs?
Hedley: Networking is essential for entrepreneurs because founders are highly reliant on accessing resources and information they don’t already have to start and build a business. Even if one has a great idea, executing on that idea requires an extensive network of individuals including employees, customers/clients, investors, advisors and influencers.
No one is born an entrepreneur or a CEO. It takes rapid learning, iteration, resilience and lots of support to build great businesses. A strong network provides that learning and support, and the access to the people, resources and capital needed for growth. Creating such a network requires time and effort as well as a redefinition of effective networking.
Networking is not just dinners and drinks or conference attendance, it can happen anywhere and must be pursued proactively and systematically. Surprisingly, the pandemic has broken some of the barriers to networking since physical location is not necessarily essential. Connecting and building relationships virtually can erase some of the obstacles to networking.
Networking is especially important for raising capital. According to a survey published in the Harvard Business Review, nearly 60% of deals seen by venture capitalists come from their personal networks, and 30% from the VC’s outbound efforts. To most effectively raise capital, you need to be well-known and/or well-connected. For women, this can be harder as many women don’t have as extensive of a network within predominantly male VC circles. Female entrepreneurs have to make an extra effort to extend their networks to meet capital providers or those close to them, i.e. other influencers.
Caprino: Who are the key people to meet and with whom to build relationships?
Hedley: It is essential to meet clients well before they become clients; talent, well before you need to hire for a role; and investors, well before you need funding. Meeting people and building relationships is all about learning, sharing, building trust, and recognizing what ‘good’ looks like.
It is especially important to meet people to identify advisors and mentors. No matter how original your idea, someone has deep experience in some aspect of what you are trying to achieve. It is up to you to find those people and enlist their support and expertise. These advisors can be either informal or formal paid advisors and the investment is well worth it. High-value advisors make getting from point A to Z, more direct, easier and faster. Good advisors save you time, effort and angst.
It is also important to meet people who are in funding networks, venture capitalists themselves or those VCs turn to for support (i.e. bankers, lawyers, consultants, advisors, search executives). Understanding the networks of these individuals whether they be from academic institutions, social venues or other groups allows entrepreneurs to break into these networks.
Caprino: How can people find networks of angel and early-stage funders?
Hedley: Finding the existing networks is not as hard as tapping into networks of angels and early-stage funders which requires time, thought and effort. There are many pre-existing networks that can be found online, in your region or through college/university affiliations.
The single most important thing to do is reach out and talk with/meet someone to start the process of leveraging these valuable networks. Seek advice from other entrepreneurs who’ve been down this path before. Reach out to those who offer accelerator programs to become part of a network. The expertise is there, but it is up to you to tap into it and the sooner you do, the more value you will receive.
Caprino: If networking is so valuable, what is holding women back from engaging in it?
Hedley: The comment I hear most often is, “I just don’t have the time.” Yet the real reason people don’t proactively reach out is due to self-imposed obstacles—mostly related to fear.
Many fear potential rejection, others fear that they have nothing to offer so are reluctant to ask for someone’s time. By fearing the word ‘no,’ you have already said ‘no’ to yourself. And it’s also self-defeating to feel that you have nothing to offer someone else. Everyone has something to offer if you approach networking with a mindset of generosity.
Preparation is the key to adding value to someone else. You must do research and get a sense of what the other person needs. In the case of investors, they are looking for great investment opportunities. In order to find those opportunities, savvy investors understand that they need to meet many people and learn what is happening in their area of interest. Investors love to talk to entrepreneurs because they know they can learn from them about the market, competitive environment and future trends.
Investors also know that it may take time to get to know a company. It is therefore essential for entrepreneurs to talk to investors well before they need capital and build those relationships early. Investors are happy to support entrepreneurs they trust. That trust is built either by having trusted contacts vouch for an entrepreneur or having direct experience in dealing with them, seeing if founders hit milestones they project. Raising money when you need it, or worse, at the point of desperation, is much too late. Develop investor relationships well before a potential fund-raising event.
Caprino: What are your top three tips for best practices when it comes to networking?
Hedley: I refer to my three best practice tips as the “three Cs”—commit, connect and continue. The single biggest obstacle to an amazing network is you. When you have made the commitment to proactively and consistently meet new people, you will be well on your way to networking. As I say in my book, it’s a bit like exercise. You don’t always want to do it, you can’t see the results right away, but if you keep at it, even if you make a commitment to meeting only 2-3 new people per week, your network will grow.
It’s not enough to just meet someone, you need to connect, and by that I mean, establish common rapport. Find something of real mutual interest and build on that. What is of mutual interest can be discovered in advance and research is essential, but it can also be elicited in conversation by asking about the person. Find out what they care about, how they see the future, and what would contribute to their success.
If you can discover things of importance to someone, you can be helpful to them. Common interests build a connection. Also, be specific about how they might be helpful to you especially in asking for additional connections. The more specific you are (i.e. “Do you know Jane Doe at ABC Venture Capital?”), the better they can help, or not. Either way, time is not wasted.
Third and equally essential is to continue the conversation. It’s critical to water the seed you’ve planted. Once you’ve connected, immediately follow up with a note. You need to then find ways to be helpful to the person you met. Send articles, suggestions for events or introductions to others who can help them. Extend another invitation, one that you would both enjoy. You are then building a relationship, one that will add value and richness to your life.
Caprino: You mention in your book that networking builds our confidence, which is so important for our success, particularly in the startup and funding world. How have you seen networking build entrepreneurs’ confidence?
Hedley: The more people you meet, the better you get at telling your story and building connection. Your elevator pitch is one of the most critical things an entrepreneur needs to perfect. Even if you think you’ve got it down, delivering your story to scores of people will help you learn what resonates and adjust accordingly. Practicing this builds confidence and there are no shortcuts. After 20+ investors meetings, you will have honed your message and clarified your ability to communicate effectively.
Meeting people is about establishing connection, a desire to continue the conversation and helping one another. Meeting people should not be transactional, but one of providing mutual value whether that value comes in the form of information sharing or of introductions to other valuable contacts.
Caprino: Finally, what are three tips that can help women accelerate their entrepreneurial growth today?
Hedley: No one succeeds alone and no one has to. It’s essential to seek the advice and assistance of others to further your own learning and success. It is also essential for you to provide that support to others. Remember, you often have to give, to get. Approach networking with a spirit of generosity to achieve genuine and long-term success.
To those who are super busy, (aren’t we all?), I say, “If you have time to eat, you have time to meet.” Virtually or IRL, never eat alone. Make meals count by spending time with others. Bring other people together. Introductions are the best gifts you can give someone.
By investing in others, you are building a network that can accelerate and expand your success.
For more information, visit meet100people.com.