Survey: Women Slow to Get Venture Capital

ByMichael Liedtke

S A N   F R A N C I S C O,  July 19, 2000 -- Although she had been steadily building herbusiness since 1994, Nell Cote didn’t really feel like afull-fledged entrepreneur until just a few months ago.

In April, her New York-based company, Hudson Williams, receivedthe venture capital industry’s seal of approval with its firstround of funding — a $3 million investment by Wheatley Partnersthat had almost as much psychic as fiscal impact.

“It’s given me a lot of confidence and has validated mycompany,” said Cote, whose 34-employee firm helps businessesimprove their Web sites. “People may meet me and think, ‘She’s awoman,’ but now they know I have venture capital behind me. Itmakes me more credible.”

Cote’s experience remains a rare phenomenon for womenentrepreneurs.

2% Into 38% = Woe

Even as venture capitalists shower billions of dollars onstart-up companies, only a trickle of the money is being investedin the estimated 9.1 million businesses owned by women.

About 38 percent of U.S. businesses are owned by women, yet just2 percent of the money invested by venture capital firms goes towomen-owned firms, according to a survey released today by theNational Foundation for Women Business Owners and Wells Fargo & Co.

“Women business owners still tend to be invisible to venturecapitalists,” said Sharon Hadary, executive director for theNational Foundation for Women Business Owners, a nonprofit researchfirm in Washington, D.C.

The survey indicates most women entrepreneurs are relying ontheir own savings and loans to finance their firms’ growth insteadof tapping into a rich vein of venture capital for cash infusions.Venture capitalists invested $70 billion in U.S. companies in the15-month period ending March 31, according to Venture Economics, aresearch firm.

The trend uncovered by the survey means many women-ownedbusinesses are being saddled with cumbersome debt that restrictstheir ability to grow. Meanwhile, venture capitalists may bemissing out on golden opportunities being developed by womenentrepreneurs who are unsure how to pitch their business ideas.

A Wake-up Call

“We see this as a wake-up call for venture capital investorsand women business owners,” said Colleen Anderson, executive vicepresident of business banking for San Francisco-based Wells Fargo.

The reasons why women remain off venture capital’s radar screenare varied, based on the survey’s findings and interviews withindustry leaders and observers.

Some of the most commonly cited explanations include:

Women aren’t aggressively seeking venture capital. The surveyfound that just 11 percent of women-owned businesses are seekingventure capital.

“It can be intimidating,” Cote said. “Having venture capitalmakes you concentrate on an exit strategy and that can be difficultfor a woman. We tend to fall in love with our businesses.”

Women don’t have enough inside connections to plug into theventure capital industry.

“Women need to build better networks to give them better accessto venture capitalists,” Hadary said. “We found in our surveythat many times a venture capitalist will look at a business planafter hearing from a lawyer, accountant or a friend.”

Until recently, most women have been running staid businessesthat offer little appeal to venture capitalists looking forfast-growing companies likely to make a killing in the stockmarket. This is changing, though, as more women receive technicalengineering degrees and others migrate from the telecommunicationsindustry to start Internet-related companies.

“Ten years ago, most women seemed to be running retailbusinesses and who wanted to invest in that?” said Nora Zietz,general partner with the Abell Venture Fund in Baltimore, Md.“Now, we are starting to see more proposals from women in fiberoptics and other technical businesses.”

Although more women have entered the industry, men stilldominate venture capital firms.

Not a Lot Wear Skirts

“There still aren’t a lot of us wearing skirts in thisindustry,” said Stacy Anderson, founder of Piedmont VenturePartners in Charlotte, N.C.

The foundation’s survey found most women are lining up theirventure capital from family and friends — usually other women.Two-thirds of the women investors polled said they had boughtstakes in women-owned firms in the last three years compared with40 percent of men investors.

“It’s always easier to invest in organizations that look likeyou. That’s human nature,” Hadary said.

Breaking through the barriers separating women entrepreneurs andventure capitalists seems to be the key. The survey found 75percent of the venture capital firms that have invested inwomen-owned businesses are likely to make new investments withother female entrepreneurs.

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