The No. 1 reason your funding application was denied
We just finished our third round of the Evergreen Fund, and we’ve realized it’s time to have a hard conversation about how entrepreneurs think about funding.
Our Evergreen Fund has three investment levels that entrepreneurs can apply for: a $5,000 grant, up to a $50,000 loan, and up to $50,000 equity investment.
In our first funding round, we had 20 applications. We made seven awards. In our second round, we had 27 applications, but only gave out three awards. We just finished collecting round three so numbers for this round aren’t in yet.
Funding is a huge barrier to success for women entrepreneurs. So why did we award fewer funds this time?
Because our applicants were thinking too small.
I get called the “dream crusher” a lot, and sometimes I leave meetings or panel discussions feeling like I’ve just shattered some dreams. In reality what I’m trying to tell you is to think bigger, believe in yourself and believe in the business you’re building. If you believe in your “crazy idea” and show me how you’re going to make it happen, I’m going to be much more likely to say yes in getting you funding through Doyenne.
Many of our funding applicants submit detailed outlines about how they are going to build a product. That’s great! But they don’t share a vision for building a company. Or if they do, it’s a hastily written response to our question about how they will use the funds to scale up.
One reason why you hear stats like “only 2% of women-owned businesses ever top $1M in revenue” is because many women start small consulting businesses that were never intended to grow beyond solo operations. And that’s completely OK. Many Doyenne members are consultants and freelancers who are working with us to refine their business plan, to find better clients, and increase their rates. We love supporting these kind of businesses through our developmental programming and spotlighting them at our events. These entrepreneurs play a vital role in our ecosystem and our local economy.
BUT. They are not the intended target of our Evergreen Fund.
We are looking to fund women who are building companies with a vision for scale. That doesn’t mean we’re only looking for the next Amazon or even the next Epic. But we are looking for entrepreneurs with a vision to build something much bigger than themselves.
Our most popular funding level to apply for is the $5,000 grant, because applicants think of it as “free money.” It comes with very few strings attached. And that’s a strategic decision on our part, but we are noticing a trend. Women aren’t willing to take a risk on themselves, so they don’t even consider the $50,000 loan/equity investment. They only apply for the grant, and they limit their vision.
If you think $5,000 would be a gamechanger, just think what $50,000 could do for you. And if you can’t answer the question, “How will you scale your business beyond yourself?” that’s a red flag that you’re not ready for funding.
But the good news is — that’s what we’re here for. We recognize that one barrier for women to get access to funding is that not enough investors are willing to support women-run businesses. But the other barrier is the way women think about themselves and their own abilities.
That’s what our developmental programming is all about — helping you blow past your own mental barriers and think bigger. WAY BIGGER.
If your business is based around one service that you offer, or one widget that you sell, you’re just building a product. And that’s a worthwhile thing to do. If you can create the lifestyle that you want with the financial freedom you need, more power to you!
But building a company is about creating multiple revenue streams. It’s about planning for growth. It’s about creating a culture, hiring employees, and creating something that would be sustainable if you disappeared tomorrow.
Many of our Evergreen Fund applicants ask for the $5,000 grant, with the ambitious goal of using it to pay for a website, a logo, stickers, flyers, Facebook ads, and to hire a part-time staffer. For one, that’s not realistic. A website alone could cost $5,000. But for two, a website is not a company. If you can show us how $5,000 will actually create a sustainable impact on your business, then that’s different than just saying, “I need a website”.
Women have a long history of showing everyone how far we can stretch a shoestring budget. This is a beneficial trait when it comes to entrepreneurship and building a business, because funding is often limited. But I challenge you: Instead of telling me, “Here’s how I can stretch this out,” tell me, “I need more money to do more and build a better business.”
Sometimes applicants want the $5K to be a bridge to keep up with their lifestyle between quitting a job and starting to make money on their own, so they don’t have to dig into their own savings. But here’s my question: If you won’t invest in your own business, why should I?
Entrepreneurship isn’t as sexy as everyone thinks it is. You have to take a hard look at your financials if you’re thinking about taking the leap. You need to be honest with yourself about your runway time (based on your savings). And talk with your financial adviser or banker to figure it out. Our Evergreen Fund is not here to just extend your runway.
Why not? Because it doesn’t work. If giving women entrepreneurs a longer runway with no consequences could spur more business growth, we might focus on it. But we’ve seen time and again that without deadlines, without risk, we don’t see the kind of transformation we want to create for these entrepreneurs. A grant given to an entrepreneur who is thinking small will encourage them to keep thinking small.
A grant given to an entrepreneur who has a big vision, but needs to test the market before getting a loan to build the company — THAT could be transformative.
When we say no, we encourage our applicants to interpret it to mean, ‘Not right now.’ You are welcome to reapply in six months. So take a look back at your app, and revise it. Ask yourself, “How do I turn this no into a yes?” We provide feedback about what is missing from your application. We offer mentoring to change your thinking from small, solo operation, to big scalable company. We can connect you with potential customers for the services you’re building. And if you ever have questions about the feedback we’ve given, please ask us so we can help clear up any misunderstandings.
It’s time to start thinking bigger than just what’s right in front of your face (whether you’re applying for our Evergreen Fund or not). Start thinking bigger than yourself. Think about a funding amount that sounds comfortable, and then add a 0 to the end of it. What would be your vision for that kind of funding? What could you build with that kind of support?