Women on the verge of A Funding breakthrough
Often at the end of the line for venture capital, female entrepreneurs learn what it takes to sell their ideas to increasingly wary investors.
Gail Goodman wanted $15 million for her 3-year-old. So she went to Harvard last fall on her baby's behalf.
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Ms. Goodman, CEO of Roving Software Inc., in Needham, Mass., was the first of 30 women entrepreneurs making pitches aimed at helping their offspring firms to grow. As participants in an innovative venture-capital forum for women called Springboard, they hope investors will supply funds ranging from $1 million to $40 million.
Money. It is the lifeline of any new business. But despite women's growing success as entrepreneurs, most still find themselves invisible to venture capitalists, more than 90 percent of whom are men. Although women own 38 percent of American businesses, they received only 6 percent of venture-capital funds distributed in the first half of 2000.
Kay Koplovitz, chairwoman of the National Women's Business Council in Washington, sums up the challenge: "We have to stop expecting women to build vibrant businesses with capital starvation," she says."
As one way of helping women overcome obstacles that lead to capital starvation, Ms. Koplovitz and other leaders launched Springboard last year in three regions. The initiative is hosted by the Center for Women & Enterprise, the National Women's Business Council, and the Forum for Women Entrepreneurs.
In another sign of progress, FleetBoston Financial has created a $2 billion initiative to connect women business owners with sources of capital.
Elsewhere, researchers at five universities are trying to determine why women get so little venture capital. Their study, the Diana Project, takes its name from the huntress Diana in Greek mythology. "This signifies women who are hunting money," explains Elizabeth Gatewood, director of the Johnson Center for Entrepreneurship and Innovation at Indiana University, one of the researchers.
What puts women at a disadvantage in receiving start-up capital?
Dr. Gatewood sees a "mismatch" between the kinds of companies women start and the ones venture capitalists prefer. Women tend to concentrate their businesses in the service and retail sectors. Yet more than 96 percent of venture-capital investments in the third quarter of last year went to technology-based and Internet-related firms, according to a survey by PricewaterhouseCoopers.
Researchers also find that women typically set more modest expectations for their company's growth than men do. That makes them less attractive to investors who want high - and quick - returns.
Women may also lack the backgrounds investors require. "Venture capitalists basically invest in people," Gatewood explains. They want middle-to-higher-level management experience, start-up experience, and technical backgrounds. Although women are moving into higher-level positions that will attract venture capitalists, Gatewood notes a troubling countertrend: Fewer women are studying engineering.
Even women with impressive experience find themselves short on networking opportunities. Ms. Goodman says she had been unable to get the attention of certain venture capitalists until the Springboard event. While she has yet to receive any financial commitments, she has a couple of leads that she hopes will back her company later this year.
"I don't think I had as deep or as natural a network of venture capitalists as my male counterparts," Goodman says. Once doors were open to her, she did not feel she was treated differently because she is a woman. Even so, she recalls, "It was hard work. I had to learn how to sell the business to venture capitalists."
