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.

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."

Aware of the importance of "selling" their businesses expertly, Springboard participants attend a day-long "boot camp" prior to the forum. Rigorous training sessions help them to hone their presentation skills.

"It's amazingly difficult to describe your product to someone," says Michelle Baker, president of Umbanet Inc., a software firm in New York. "You need a clear, concise description of what you're doing."

Women also need confidence in public speaking. Jean-Marie Lovett, director of product management for Abridge Inc., a software company in New York, says that in business school, she was "struck by how much women did not like to talk in class. If you aren't confident telling people why you're the best at what you do, you won't survive the venture market."

Durreen Shahnaz, co-founder of OneNest in New York, a digital marketplace for global crafts, also observes that women tend to get discouraged easily. "You need to have a thick skin," she says. "You will be rejected left and right, but you have to believe in yourself."

When venture capitalists do underwrite women-led companies, the results can be impressive. Weston Presidio Capital in Boston has invested 15 percent of its funds in women-led firms. Those investments account for 63 percent of its returns.

Calvin Hackeman, a director at Grant Thornton accountants and management consultants in Vienna, Va., sees other encouraging signs. He calls today's breed of venture capitalists "entirely different" from those in the field 10 years ago. "These are people who say, 'I'm here to be part of your management team, to promote your business, and make it a win-win situation for everybody.' In the past, they were not quite as open and friendly about it."

Koplovitz also finds cause for optimism. She says women entrepreneurs received just 1.5 percent of all venture-capital funding in 1997. In the next two years, she says, "it will be 15 percent and rising rapidly."

Already, investors have committed $50 million to firms represented at Springboard 2000 in Boston. Earlier events in Silicon Valley and the mid-Atlantic region raised $350 million for women-led companies.

Heartened by that success, Springboard organizers have scheduled four events in 2001: Silicon Valley in February, New York in March, Chicago in May, and Boston in November.

Koplovitz and other advocates hope more venture capitalists will share the attitudes of Martin Bloom, managing director of Emblem Technology Partners Ltd., venture capitalists in London.

Describing himself as "very impressed" with the quality of women entrepreneurs in start-up and early-stage companies in the United States, Mr. Bloom says, "The best of them are more than a match for their male counterparts."

Women entrepreneurs, Bloom finds, "know where the gaps in their knowledge or expertise lie. They are willing to be guided to seek out people who can fill those gaps, whereas many male entrepreneurs are much more arrogant."

Women's capabilities, he continues, are "more transparent. Men hide their capabilities, because they also hide their weaknesses. I would actively seek out women-led companies because of the good experience I've had to date."

Myra Hart, professor of entrepreneurship at Harvard Business School and a founder of Staples, also encourages venture capitalists to back women-led firms. Speaking to a roomful of investors at the Springboard forum in Boston, she says, "You have an opportunity to be the men behind the women who are going to rock the world."

(c) Copyright 2001. The Christian Science Publishing Society

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