Sunday, August 27, 2000

Women's quest for capital rocky road

By Susan G. Strother
The Orlando Sentinel

        Kirstie Chadwick's most successful introduction to a venture capitalist went something like this: She stalked the guy — in a friendly way, mind you — as he pingponged across a conference room after a speech.

        Finally cornering him, she made her sales pitch — the one shot she had to pique his interest. Luckily for her, it worked. Phone calls and meetings followed, and Ms. Chadwick ended up with $1.5 million from the venture capitalist and a second investor.

  • Develop a solid business plan.

  • Become an expert at describing the company and product.

  • Hire a strong management team.

  • Network to meet potential partners.

  • Understand that taking on outside investors means giving up some control of the company.

  • Be persistent. Survey showed women who obtained outside funding had contacted an average of 15 groups, while those still seeking money had spoken to 11.

  • Check out these Web sites:,, and

        “I was like a puppy dog,” recalled Ms. Chadwick, president of, an Orlando, Fla., company that sells software to protect copyrighted material. “You follow someone around until you get a break, and then you have 30 seconds.”

        The quest for venture capital isn't easy — and it's particularly difficult for female entrepreneurs. Venture money is go-go juice. It can push a business over the top, providing cash needed to launch a marketing campaign, conduct research or otherwise go from shoe box to big box.

        But a recent study by the National Foundation for Women Business Owners found that women hardly register on the screen of venture-capital companies.

        Women own about 40 percent of U.S. firms, yet they receive only between 2 percent and 5 percent of the venture capital money meted out each year, the Washington, D.C., organization found. By any measure, the organization found, entrepreneurs such as Ms. Chadwick are in the minority.

        What gives? The usual suspects, in part. Most venture capitalists are men, and they tend to invest in male-owned businesses. There's also a lack of networking: Women don't have the venture-capital connections their male counterparts share. Women also are more likely to open “softer” businesses that are not as attractive to outside investors.

        But there's another factor at work here. Interestingly, the survey found, most women didn't want venture money. Only 11 percent of the female business owners in the survey had either received venture capital (6 percent) or had sought it (5 percent).

        Even though outside investment is a key way to expand quickly, the majority of women weren't interested. They preferred to pay for expansion the old-fashioned way, with dollars generated from the business.

        “Everything we have wanted to do we have been able to afford internally,” said Sharon Wolford, founder of Carley Corp., a 10-year-old Orlando company that does software training. Its sales last year were about $10 million. “I started with $15,000 of savings,” she said, “and that basically bought me a couple of computers.”

        Additionally, there's a downside to venture capital that Ms. Wolford and many women surveyed were unwilling to accept. Chiefly, entrepreneurs must be willing to give up some share of ownership or control of their business in exchange for the outside investment.

        That's the quid pro quo of the venture game. At DigitalOwl, outside investors now own about 40 percent of the year-old company. Ms. Chadwick admits that has been a little difficult to accept.

        “It's a scary thing to give up some control. It's your baby,” she said.

        Even so, she's looking for second-round financing, somewhere between $6 million and $12 million, that she'll use to beef up sales and marketing and add employees. That will mean giving up even more of the firm that she and partner Robin Phelps have built.

        “We have had to do a lot of soul searching,” Ms. Chadwick said.

        Relinquishing control may be especially hard for women business owners, experts said. That's because many of them have felt a lack of control — and opportunity — in their careers when they've worked for others.

        The depth of their unwillingness to give up anything was clear in the survey. Forty-eight percent of the women said they would not part with any piece of their business in exchange for an investment.

        The problem, of course, is that without venture capital, women-owned businesses will find it more difficult to grow to the same size as their male-owned counterparts.

        “A business can only grow so big without outside investors,” said Bruce Rosenthal, a spokesman for the National Foundation for Women Business Owners. “It basically comes down to a trade-off.”

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- Women's quest for capital rocky road
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