Girls Just Wanna Have Funds Changing the way venture capital firms look at women
Opinions expressed by BIZ Experiences contributors are their own.
Can women get venture capital funding? The arguments on bothsides are equally persuasive.
Venture capitalists say they consider profit potential, notgender, when looking for deals. But despite this apparentneutrality, women only got an estimated 4 to 5 percent of the $38billion invested in the United States in 1999.
"More women are being funded today, and there are a numberof highly qualified women seeking funding, but relative to thetotal market, the numbers are small," says Willa Seldon,general partner with San Francisco-based Viridian Capital, thenewest SBA-backed small-business investment company (SBIC)targeting women BIZ Experiencess.
But, Seldon adds, the numbers are improving. She attributes thechange to several factors: women BIZ Experiencess beingbetter-prepared to seek capital, more venture capitalists lookingto fund women and more women working at established venturefunds.
Sharon Hadary, executive director of the National Foundation forWomen Business Owners, views the discussion as a sign of how farwomen have come. "When we first started, we worried aboutissues like banking relationships, access to credit and[convincing] banks that a woman-owned business is viable," shepoints out.
Acknowledging that the market is still clearly under-served,Hadary speculates that preparation is part of the problem. Shebelieves that while some women have the management teams and skillsfinanciers like to see, most don't.
Another obstacle is that most venture capitalists only look atproposals recommended by people they know, and "a lot ofventure capitalists don't have women BIZ Experiencess in theircircles of friends," says Kay Koplovitz, CEO of New YorkCity's Koplovitz & Co., a media investment firm. She saysthe percentage of women getting equity capital is anemic.
To ameliorate the negative fall-out from fighting thegood-old-boys network, Seldon says Viridian reviews every businessplan that comes its way, but only invests in less than 1 percent ofthe proposals.
Another development that may help circumvent women's lack ofaccess to venture capital is the growing number of women angelnetworks. There's no definitive list of these organizations,but Koplovitz has found networks in cities like Seattle; Boston;Washington, DC; and Cincinnati.
As more women BIZ Experiencess move into the ranks of investors,the amount of venture funding available to women, as well aswomen's overall chances of obtaining equity financing, shouldincrease.
Therapeutic Capital
For the first 10 years of her company's life, Laura PeckFennema was content to grow Essentiel Elements using internalfinancing.
Then came the decision to add a skin-care line to a product mixthat already included aromatherapy body and hair items sold to spasand specialty stores. "Launching a skin-care line requires amuch larger budget," says Fennema, 42, of her need for outsidefunding. "And we needed to hire our own direct sales force.That takes deeper pockets."
Going the venture capital route was a natural for Fennema, whohad worked as a technology stock analyst in investment banking foreight years prior to starting her San Francisco company with$50,000 in savings in 1989. But even Fennema didn't realize hownaive she was about the process.
"In the thick of it, for three or four months, searchingfor venture capital consumed about a third of my time. I wasmeeting with people constantly, sending out business plans,responding to questions and revising my financing," she says.She eventually ended up with a first round of financing in March1999--a combination of $500,000 in venture funding and $750,000 inprivate equity capital. "I approached only about five venturecapitalists, and when I realized they were going to have to do somuch due diligence to close the deal, I decided to take anotherroute."
Fennema, who believes the lengthy due-diligence process is thenature of the venture capital beast, also cautions women tounderstand that going to traditionally male-dominated venture fundscan be an iffy proposition. This is particularly true if you'repitching a deal that might be viewed as a "women'sissue," such as a company only selling services and productsaimed at women.
While Fennema was surprised at the level of intensity requiredto raise her $1.25 million in equity capital, she's extremelypleased with the results--and her 1999 sales of $10 million:"It has allowed the company to grow prettydramatically."
Contact Sources
Koplovitz & Company, (212) 551-3585
National Foundation for Women Business Owners, (301)495-4975, ext. 13, http://www.nfwbo.org
Viiridian Capital, 220 Montgomery St., #946, SanFrancisco, CA 94104, (415) 391-8950
