Tuesday, July 18, 2000
Women lack venture funds
Industry begins to see opportunity
By Michael Liedtke
The Associated Press
SAN FRANCISCO — Although she had been steadily building her business since 1994, Nell Cote didn't really feel like a full-fledged entrepreneur until just a few months ago.
In April, her New York-based company, Hudson Williams, received the venture capital industry's seal of approval with its first round of funding — a $3 million investment by Wheatley Partners that had almost as much psychological as fiscal impact.
“It's given me a lot of confidence and has validated my company,” said Ms. Cote, whose 34-employee firm helps businesses improve their Web sites. “People may meet me and think, "She's a woman,' but now they know I have venture capital behind me. It makes me more credible.”
Ms. Cote's experience remains rare for female entrepreneurs.
Even as venture capitalists shower billions of dollars on start-
up companies, only a trickle of the money is being invested in the estimated 9.1 million businesses owned by women.
About 38 percent of U.S. businesses are owned by women, yet just 2 percent of the money invested by venture capital firms goes to women-owned firms, according to a survey released today by the National Foundation for Women Business Owners and Wells Fargo & Co.
“Women business owners still tend to be invisible to venture capitalists,” said Sharon Hadary, executive director for the foundation, a nonprofit research firm in Washington, D.C.
The survey indicates most female entrepreneurs are relying on their own savings and loans instead of tapping into a rich vein of venture capital for cash infusions.
According to San Francisco-based research firm VentureOne, 2,559 companies received venture capital funding in 1999 — of that total, 186, or 7 percent, had female founders.
Venture capitalists invested $48 billion in U.S. companies in 1999, according to a separate report by Newark, N.J.-based Venture Economics. The company did not break it down by gender.
The trend uncovered by the foundation's survey means many women-owned businesses are being saddled with cumbersome debt that restricts their ability to grow. Meanwhile, venture capitalists may be missing out on golden opportunities being developed by female entrepreneurs who are unsure how to pitch their ideas.
The reasons why women remain off venture capital's radar screen are varied, based on the survey's findings and interviews with industry leaders and observers. Some include:
Women aren't aggressively seeking venture capital. The survey found that just 11 percent of women-owned businesses are seeking venture capital.
ãWomen don't have enough inside connections.
ãUntil recently, most women have been running staid businesses that offer little appeal to venture capitalists looking for fast-growing companies likely to make a killing in the stock market.
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