- Women business owners in the US aren't getting nearly as much funding as their male counterparts.
- That's one of the reasons Create & Cultivate hosted CEOs, founders, entrepreneurs, side-hustlers, and aspiring business owners at its first Small Business Summit on October 19.
- Not all businesses need venture capital, but the smallest businesses need cash to get off the ground.
- The summit's first panel of founders and CEOs have propelled their startups into major companies, some raising millions in funding. They shared their advice on the methods they used, from bootstrapping to crowdfunding.
- Visit Business Insider's homepage for more stories.
October is National Women's Small Business Month, a time to recognize the 12.3 million women-owned businesses across the US.
But it's also a reminder that female business owners in the US aren't getting nearly as much funding as their male counterparts. For the last two years, women earned 2.2% of all venture capital investments, as reported by Fortune and TechCrunch.
That discrepancy is one of the reasons Create & Cultivate, a community and conference for women building their careers, held its first Small Business Summit in partnership with Mastercard. On October 19, the event hosted CEOs, founders, entrepreneurs, side-hustlers, and aspiring business owners for a day of panels, workshops, and networking.
Not all businesses need venture capital, but the smallest businesses need cash to get off the ground. There are many other options for small businesses to gain funding, such as small loans, grants, and credit lines. The summit's first panel of founders and CEOs, some of whom have raised millions in funding, shared their advice on the methods they used, from bootstrapping to crowdfunding.
Here are nine ways they advised small business owners to raise capital, and how to know what method is the best approach.
Business Insider attended the summit and took the below quotes and information from the panel.
1. Figure out what kind of money your business needs right now.
Arielle Loren is the founder and CEO of 100K Incubator, a business mobile app she started to help women entrepreneurs get funding. She breaks funding down by three levels and tells the women in her incubator to assess which step they're ready for.
At level one, a business is earning under $3,000 per month in sales and hasn't established a proof of concept yet. At level two, a business earns $3,000 or more per month in sales and the goal is to reach six figures per year. At level three, a business earns $9,000 or more per month in sales and is ready to pursue venture funding.
"It's very sexy to raise venture capital money," Loren said, "but the truth of the matter is that raising money doesn't necessarily mean that you have a profitable and viable business just yet."
Loren said that if you can prove you're capable of doubling your money, you've mastered your industry, and you know how to run your business, investors will be the ones chasing you down.
"It's way more exciting to say, 'Hey, we hit our first six figures' or 'We hit our first seven figures this year' more so than 'We raised six figures,'" Loren said.
Ultimately, Loren added that being profitable puts you at a greater position of power, at which point you're more likely to determine your own terms for investments.
2. Understand the dynamics of your industry.
Many successful companies are not profitable for years, and profitability can be relative to your industry's norms.
Hilary McCain, founder and CEO of Sweet Reason, a CBD-infused sparkling water, said that food and beverage businesses are typically not profitable for years. "Every food and beverage investor I know, if they look at it and it is profitable, they tell you to spend more money to make it unprofitable," McCain said.
If a beverage company is looking to be acquired by a larger company like Pepsi, McCain said those companies only look at sales and don't care if the business is profitable.
"It's so important to know what industry you're in and the dynamics of the industry you're in," McCain said.
3. Know your 3- to 5-year plan.
Vanessa Dew, cofounder and CSO of Health-Ade Kombucha, said it's important to know your three- to five-year plan and align with your team before pursuing investments. "Because if they're not on the same page as you, the decisions that each make are going to be against each other, and that's just never easy or good for the business," she said.
Jaclyn Johnson, the founder and CEO of Create & Cultivate, advised entrepreneurs to know their end-goal, whether it's to be acquired by a major company or to stay small for 10 to 15 years.
She said that it made the most sense for Create & Cultivate to be self-funded since the company sells a service and there are no manufacturing or logistics costs. This came with a lean operation, while her venture-backed competitors could afford ads in the New York Times. But Johnson said she enjoys the benefit of complete control and not answering to investors.
"The agenda of your investors and the agenda as a founder, they don't always diverge, but they could," said Dew.
4. Know your cash flow and fall in love with the numbers.
Molly Hayward, cofounder and CBO of period-care brand Cora, said being conscious of your cash flow will help you know when you need to raise more money. Plus, investors will be more apt to trust you. "Know your numbers inside and out so that you can very quickly speak to those," Hayward said.
When she didn't have the expertise she needed, Hayward brought in advisors, investors, and other entrepreneurs to lean on. "Don't be afraid to invest in those learnings and ask for help to say, 'I don't know what that term means,'" Hayward said.
Despite Johnson's aversion to finance, her accountant mother told her to "fall in love with the numbers" when she started her business. Johnson taught herself everything on YouTube and now passes the same advice to other entrepreneurs.
But knowing the numbers doesn't mean you have to do all the accounting yourself, especially if it's not your strong suit. "Learn your numbers, but also get an accountant," Loren added.
5. Tap into the people around you first.
At the beginning stages of Sweet Reason, McCain did a round of family and friends funding. They gave her loans with no interest, and she gave them equity in the business.
"A lot of times people say they're bootstrapping," McCain said. "But they're also trying to convince everybody they know to invest in their business."
6. Crowdfunding can lead to larger rounds of funding.
Hayward recommends crowdfunding for businesses in the early stages. She started Cora self-funded, then raised $33,000 in a crowdfunding campaign. She said the press coverage led Hayward to her cofounder; they then got $2 million in seed funding within a year.
"When my cofounder and I teamed up, we were able to go out and work our networks and go talk to people and go pitch people," Hayward said.
7. Think beyond series A funding.
Dew advised entrepreneurs to think through their fundraising strategies before going after capital. "What you negotiate sets the precedent," she said. "Your series A will really stay with you."
When Dew and her cofounders were raising their first round of capital, she said they were living off $300 every six weeks and eating ramen noodles every other day. "Desperation for that capital, it really puts you at a disadvantage," said Dew. "Because you're not really thinking through, beyond just that series A funding."
8. The clock starts ticking the second you start raising money.
McCain said that once you get venture capital, it can dramatically change the dynamic of your business. "Whether or not you raise money depends on what your vision is for the business," McCain said.
She added that she initially wasn't going to pursue venture capital and intended to stay self-funded. But then her biggest competitor raised $10 million, and she didn't want to lose out.
"The second you raise money, the clock starts ticking," she said. "All you have is this enormous pressure all of a sudden."
There's also an emotional side to it, Dew said — especially when investors on the outside see your company as just numbers. "It's a bigger responsibility as the stakes get higher and the revenues get bigger, the valuations get bigger," she said.
9. There's an overall importance to profitability.
Johnson said one of the most important things to know when you're starting a business is how it makes money and whether it can scale and still make money.
"It isn't about your idea, it's about your execution," McCain said.
Dew said that liquidity gives business owners room to negotiate "from a point of power, rather than aspiration."
"Cash is always king, but profitability is our savior," Dew said. "You define your future once you are profitable."