Women business founders rising, but slowly

"It's sad," says Lane Nemeth, who founded Discovery Toys 30 years ago and built it into a $100 million business before selling it to Avon Products in 1997. Four years ago, she co-founded Petlane, a Tupperware-style direct-sales company. The pet products company has $1 million in annual revenue, but Nemeth predicts that it will grow to $400 million within 20 years. Pet products, she says, are a $41 billion-a-year industry, 20 to 40 times larger than the educational toys industry was when she founded Discovery Toys.

If Nemeth succeeds, she will have twice beaten the odds. Consider how long those odds are:

•Ohio State University finance professor Rudi Fahlenbrach examined the Standard & Poor's composite 1500, an index of publicly traded companies of all sizes. Only 63 still had the original founder as CEO. None were women.

•Of the last 100 publicly traded companies that crossed $1 billion a year in revenue the first time, only Endo Pharmaceuticals was solely founded by a woman, Carol Ammon, now a director after being chair.

•Among the other 99, AMN Healthcare was co-founded by husband and wife Steven and Gayle Francis. At Cheesecake Factory, Evelyn Overton made cheesecakes that were popular at bake sales before her husband Oscar opened a bakery, and their son David launched a small chain of sandwich shops that last year grew into the $1 billion national restaurant chain. Elizabeth Arden, who died in 1966, teamed with chemist Fabian Swanson to launch the beauty products company that took until last year to hit $1 billion in sales.

•Thomson identified 100 smaller companies that have surpassed $200 million in revenue and are growing so fast that they will likely be the next to surpass $1 billion. Four had women as founders or co-founders: Kendle International, a clinical research services provider founded by Candace Kendle and Christopher Bergen, friends at the time and now married; cosmetics company Bare Escentuals, founded by Diane Richardson; Super Micro Computer, co-founded by Chiu-Chu (Sara) Liu Liang with husband Charles Liang; and Rait Financial Trust, founded by Betsy Cohen.

"This is quite dismaying to me, as I'm the father of three bright, enterprising daughters," Thomson says.

Not -so-sunny outlook

That women are not growing businesses into megacompanies is more than a curiosity and may have broad implications. Bruce Phillips, senior economist at the National Federation of Independent Business, says 66% to 80% of all new net jobs are created by small firms. But the Small Business Administration says that among those to begin operations this year, 82% will fold by 2012.

Small businesses destroy jobs as fast as they create them, and net job creation comes from the handful of companies called gazelles that start small and grow large, says Veronique de Rugy, a senior research fellow at the Mercatus Center of economics at George Mason University.

Thomson agrees. He says 7,500 U.S. companies went public from 1985 to 2007, but the 5% (387) that reached $1 billion in revenue created 56% of the jobs and 64% of the market value. In the last five years, China has passed the USA in creating $1 billion companies. Health care and taxes are hot issues, but policymakers should not overlook the importance of nurturing new billion-dollar businesses, and women could be a part of the answer, he says.

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