Women entrepreneurs aim for venture capital

By Alex Ramsey – 9/24/2001

If you are a woman looking for venture money, the statistics are not in your favor. Last year, only 6 percent of venture money raised went to companies headed by a female.

Yet, the positive economic impact of women within companies who go public, an important exit strategy for venture-funded firms, is powerful and conclusive. The stock price of companies whose executive team is at least half female is 23 percent higher than companies with no top-brass women. Earnings per share are 281 percent higher.

Regardless, women receive proportionally less funding than their male counterparts. Understanding some of the reasons why can help women improve their chances of winning venture support.

It’s important to remember the nature of venture capital, which is to provide equity for fast growth, high revenue companies. Although women are creating companies in record numbers, they typically start small businesses, rather than those with the potential for billion-dollar revenue.

Sometimes, women are reluctant to give up control once they have achieved a degree of success in starting a company, making it difficult to attract investors. Fewer women are in executive offices, meaning there are fewer female leadership candidates to lead startups.

Studies show women tend to be more conservative with other people’s money, while men have less issues with risking capital. Women also are more likely to start service firms, rather than the life science or technology companies loved by venture capitalists. And then, there’s how women look, act and communicate.

Cultural issues do play a big role. Most venture capitalists are male, and they rely heavily on the networks of mostly men that they know.

Closing gaps in networking is one reason the Forum for Women Entrepreneurs, a San Francisco-based group with a Texas branch, is planning the Southwest’s first women’s venture capital conference.

Next March, organizers will co-host Springboard, showcasing women-owned companies to the venture community. One of the rare female venture capitalists, Heather Gilker of Opus Ventures, believes with encouragement like this smaller firms could become venture concepts.

Dallas venture capitalist Guy Hoffman of TL Ventures also supports FWE: “At the end of the day, there’s clearly been a glass ceiling. Men have enjoyed a good-old-boy network. That hasn’t existed for women.”

Besides tradition and culture, social graces also impact women, who must watch how they communicate during meetings. What is perfectly acceptable among other women is strange and uncomfortable to men. For example, women must be direct and brief, mirroring more traditionally male behaviors.

Austin chief executive Ingrid Vanderveldt of 212 Studios has raised $7 million. She was advised to cut her hair, wear glasses and dress differently.

“I was told to act like one of the guys, that I was different,” she says. “I tried it for a while and was miserable. I stopped. If I try to be anything but myself, it doesn’t work.”

Vanderveldt’s experience underscores the delicate balance women face in making sure their idea is heard. They may have to adjust behavior, but not go so far that they lose themselves.

Many women fear the investor road show. Overall, women are no better or worse at such presentations than men. Men have certain issues to watch, and women have others. Usually, women have to be sure they communicate facts precisely and keep comments simple. Dressing conservatively is a good idea, but changing personalities is not.

So what else can women — or anyone for that matter — do to enhance the chances of success?

The first thing is to honestly assess whether or not a business idea is venture fundable and to make sure the business plan is well-conceived. Next, it’s important to build a network of professional advisers to review the business plan and pitch as well as open doors.

Thinking strategically about every meeting helps. Women can expect to be challenged in ways often unacceptable within polite society. Entrepreneurs who learn it’s not personal are more likely to be successful as well as avoid the wounds caused by hurt feelings.