Anu Duggal started the first early-stage fund for female-founded companies. What criteria does she look for in pre-revenue companies?

"There are no hard and fast rules. We're really looking to invest in great founders with big vision, from relevant backgrounds. And, you know, early signs of traction," says Duggal, who is founding partner of the Female Founders Fund, a seed-stage venture fund that has become a leading source of capital for women founders. It closed its second fund of $27 million in 2018, which followed a first fund of $5.8 million.

Since its launch in 2014, Female Founders Fund has backed successful startups such as razor company Billie, women's health startup Maven Clinic, astrology app Co-Star, Real, Rent the Runway, and many others.

It's no secret that women-led startups get a smaller piece of the venture capital funding pie. Companies with female founders drew only 2.4 percent of venture capital dollars in the U.S. in 2020, according to Crunchbase. Duggal spoke in a recent stream event with Inc. editor-at-large Tom Foster. Here are a few tips she shared on how to make your company stand out to investors.

1. Find product-market fit.

The most vital thing a founder can do is find the right product-market fit, according to Duggal. Funding this effort typically "involves raising a small amount of family-and-friends capital. For some founders, you could go directly to institutional capital," says Duggal. 

Once a startup has created a product that is drawing more demand than it can handle, that could be a sign that it's found the right product-market fit, and it's time to raise more funding. 

2. Focus on crafting your authentic story.

What is the story of your brand? Female entrepreneurs are often held to intense scrutiny by both investors and the press. Duggal advises companies to focus on making the story of the brand as authentic as possible. Especially when it comes to consumer-facing brands, it's important to have a brand that really resonates with customers and has a specific point of view. 

3. Explain why you're uniquely situated to solve this problem.

For social enterprises and other socially minded startups, Duggal advises founders to focus on explaining the problem they hope to solve. 

"Be able to explain how and why you, as a founder, are uniquely situated to solve this problem or this opportunity," says Duggal. 

She also emphasizes that it is vital for founders to really know their numbers. "A lot of founders kind of underestimate how important those underlying unit economics and financials are. I think it's really important to understand what are the levers that can really drive your business," she says.

Finally, Duggal says it is important for companies to focus on market valuation. Why is your service or product needed? "Whether it's customer surveys or putting out a small beta, I think all of these can be incredibly important as a part of that fundraising story," she says.