Top Five Challenges Female Founders Face and How to Overcome Them

In its recent report, S&P Global analyzed earnings and share price data of U.S. -based companies between 2002 and May 2019, following 5,825 new executive appointments for roles of CEO and CFO. About 10% of those appointments were women.

The data showed that:

• In the two years following a new female CEO appointment, these companies outperformed those with newly-appointed male CEOs by an average of 20% on share price returns.
• In the two years following a new female CFO appointment,these companies outperformed those with newly-appointed male CFOs by an average of 8% on share price returns and 6% on profitability.

Despite all this positive news, there are several challenges that female founders and leaders still face today.

One of the biggest setbacks women experience is being uncomfortable with failure. There are two reasons for it:

Evolutionary: Women used to be the main caretakers of children for centuries and thus it is natural for us to instinctively avoid putting ourselves in risky situations which could pose a threat to our stability.
Psychological: Women hold themselves to a higher performance standard, are more easily discouraged, and react to negative feedback much more strongly than men. Research conducted by Harvard Economics professor Claudia Goldin, demonstrated that women who earned B’s were half as likely as those who earned A’s in introductory economics to stick with the major. For men, there was no difference.

All entrepreneurs are risk-takers, and thus to be successful, we must become comfortable with uncertainty and with a very high probability of failure. But then should you take every possible risk?

The Startup Station’s recommendation:

I suggest you formulate a robust framework for evaluating risks that will reduce uncertainty to a number of predefined parameters you can measure and act upon. This approach will also lead to more responsible decision-making.

It’s a well-known fact that it is much harder for women to raise capital. According to a recent Fortune article, only 2.2% of all VC funding in 2018 went to female founders.

There are three reasons for it:

1. Women won’t ask for funding as much as men do because they wait until they are a lot more prepared (issue # 1 at work).
2. First impression bias. As Dana Kanze, London Business School Professor, noted in her TED talk, many female founders often get asked negative questions when they pitch. This ultimately results in them not able to sell their startup adequately and, consequently, not getting funded.
3. Lack of finance knowledge. Many founders don’t know finance, but this issue is especially dire for women and can significantly reduce their chances of getting funded. If you are not able to speak the investor language, credibly prove why your business is financially feasible, or know your key performance indicators and how you can achieve them, it will be a lot harder to convince investors to give you capital.

The Startup Station’s recommendation:

• Don’t be afraid to ask for funding when you meet the qualifying criteria for a given round. The downside of waiting for too long is that you run out of cash and may be forced to close your venture altogether, forfeiting months of hard work and any intellectual property you’ve developed.
• To address the first impression bias, I recommend that you respond to the immediate question and concern, but then turn it around and focus on the bigger picture, on the long-term revenue potential, on the frontiers that your startup is poised to conquer.
• Finally, learn finance. The Startup Station specifically deals with this problem. We specialize in modeling and valuing early-stage ventures and are passionate about supporting all female founders.

A recent SCORE’s report showed that entrepreneurs who seek mentorship significantly increase their chances of success regardless of gender. That is not a surprise, and thus it is so important for any startup to have a strong board of advisors. The board of advisors enables you not only to get access to missing expertise and attain much needed outside perspective, but also adds credibility to your startup, provides accountability to your actions, and gives you access to a much wider network.

The bad news is that even though we do know the benefits of networking, we are not using it fully. A study from McKinsey and LeanIn.org recently found that women have smaller networks than men, spend less face time with senior executives, and are more likely to have a network made up exclusively of other women.

There are two reasons for it:

1. Different approach to networking. Men tend to approach network more transactionally where women are more focused on creating deeper and meaningful connections.
2. Life-work balance constraints. Many women prefer not to go to as many evening networking events because of family commitments.

The Startup Station’s recommendation:

• I recommend you start approaching networking more strategically. This goes both for clearly identifying whom you want to meet at which event as well as which events you go to to meet your time constraints.
• I also suggest that you don’t try to force something that does not feel natural to you, but adopt a style of meeting people that you are comfortable with and it will organically lead to more meaningful connections.When I attended business school, I viewed networking as a chore precisely because of its transactional and artificial nature. Only later, when I became an entrepreneur, I began to enjoy meeting people, and learning about them, their ventures, their careers and their interests.

No male founder will ever be asked how he’s planning to balance work and kids, or work and pregnancy. For all female founders, this happens a lot, especially as they are raising money.

There is no question that being an entrepreneur is a 24/7 job, and running a company does take a toll on family life. There is also no question that there are ways to handle it with the right support system both at work and at home.

The Startup Station’s recommendation:

With this in mind, I recommend that you create a strong support network at home to allow you to sometimes work long hours and travel, but at the same time build a culture at your company enabling all employees to fulfill their family commitments, with even more flexibility for young mothers.

Being the only woman in the room may be intimidating. I have heard many female executives and founders reflect on them feeling like outsiders in a room full of men especially if they also all know each other.

The Startup Station’s recommendation:

1. In a networking event, I recommend that you adapt the networking approach we discussed above and focus on meeting a few key people. Doing preliminary research of who they are may also help you to feel more comfortable and find common ground faster.
2. When you present your company to predominantly male investors, consider framing your argument using the points of reference other meeting participants can relate to. For example, if you are pitching a product for a female customer base, focus on hard numbers, market size, demand potential and profitability, as opposed to why women will love it.
3. Seek other female founder and VC mentors and role models. The good news is that you are not the only one who faces issues specific to female entrepreneurs. Often times, the issues are fairly similar, though the specific context may change. Getting advice and guidance from those who have crossed the hurdles and found successful approaches before can be invaluable in helping navigate the startup challenges for female founders.

In conclusion, while there are challenges, they can be overcome, and I would like to empower every female founder out there to pursue her dream.

Victoria Yampolsky, CFA, is President and Founder of The Startup Station, an educational and consulting company for modeling and valuing early-stage startups. She specializes in the financial modeling and valuation of pre-revenue companies and evaluates the financial feasibility of business models. She also created a finance curriculum for early-stage founders and launched The Startup Station’s educational program in 2015. Since then, more than 1,000 founders have attended The Startup Station finance classes and learned the basics of financial modeling, valuation, and startup financing.

Previously, Victoria worked for Deutsche Bank and was a technology consultant with CapGemini’s Financial Services Division. Victoria holds a Bachelor’s Degree, Cum Laude, in Computer Science, with a minor in Mathematics, from Cornell University and an MBA, with honors, from Columbia Business School. Victoria is also on the Advisory Board of the Computing and Information Science (CIS) Department of Cornell University.