Women on the Rise

Angels in Flight

When Sharelle Klaus launched Dry Soda in 2005 to produce and distribute her brand of nonalcoholic beverages to high-end restaurants and food retailers, she didn't have to look far for potential backers. As president of the Forum for Women Entrepreneurs in Seattle, it was her job to network with angel investors. So when it was time to raise equity capital of her own, she quickly put her address book to work. "When I started, all my connections were with high-tech investors," recalls Klaus, 37, "but those high-tech investors knew other investors." Not only did those other connections invest in her business, but they also helped her staff the approximately $1.5 million company and find distributors. Klaus also recently completed a $1.5 million round of angel financing.

A recent study from the University of New Hampshire Center for Venture Research shows that women outperformed all entrepreneurs in receiving angel investments to fund their business ventures in 2005. Although women-led ventures accounted for 8.7 percent of the entrepreneurs seeking angel capital, 33 percent of those women received angel dollars in 2005, while the overall rate was just 23 percent, according to the study.

"That's a really recent trend, and I was amazed when I saw it," admits Stephanie Hanbury-Brown, founder of Golden Seeds LLC, an angel investor group based in Cos Cob, Connecticut, that invests exclusively in women-led firms. "The [number of] women entrepreneurs getting venture capital has [hit] a 10-year low."

"At the same time, women are starting businesses at twice the rate of men today," Hanbury-Brown adds, citing a statistic from the Center for Women's Business Research. "The quality of the women starting businesses and the quality of the businesses they are starting has increased in the past several years."

But advocates for women-led firms argue that entrepreneurs like Klaus may be exceptions. More often than not, they say, women entrepreneurs lack access to the traditionally male world of angel investing. That--combined with angels' tendencies to invest in only high-tech ventures--has kept many women entrepreneurs at arm's length.

"[Until recently], women's experiences were more in industries that didn't grow in scale as much, so they were not as likely to be candidates for large equity investments," says Marianne Hudson, director of angel initiatives for the Ewing Marion Kauffman Foundation.

In fact, it was the "imbalance of VC investments that go to men entrepreneurs" that moved Hanbury-Brown to launch Golden Seeds in 2004. "I realized women were starting companies in a whole range of industries [where] typical angel investors probably would not get beyond the executive summaries in their business plans," says Hanbury-Brown, whose group invests in a variety of industries in addition to technology.

Currently, only about half a dozen women angel groups operate in the U.S. However, that number is likely to grow. "Anecdotally, I would say there is a trend toward more women becoming investors but also more women becoming investors and wanting to invest in women," says Maggie Kenefake, manager of growth entrepreneurship for the Kauffman Foundation.

Experts say women investors are more likely to support a broader range of investment opportunities. Adds Kenefake, "Their number-one priority is a solid investment and a healthy financial return, but I think women investors [are] bringing different life experiences to the table, [giving] them a different perspective, and perhaps they will consider opportunities that their male counterparts might not."--Crystal Detamore-Rodman

Clipped Wings
Last summer, I saw The Devil Wears Prada, the movie about a powerful fashion magazine editor who tyrannizes her young assistant. Because Meryl Streep's ruthless character gives her protégé outrageous assignments like fetching an advance copy of the latest Harry Potter novel for her kids, we are meant to believe she is the devil incarnate. If a male executive asked his assistant to do things like that, I bet he'd be called a great dad.

I guess Hollywood is trying to tell us that it's OK to run a money-losing children's bookstore that can't compete with a well-run national chain (Meg Ryan in You've Got Mail), but it's not OK to be an ambitious, self-assured female executive who tries to beat her ex-boyfriend at his own game (Demi Moore in Disclosure). In other words, it's fine to be Lois Lane, but it's still not cool to be Superwoman.

Maybe this helps explain the sad statistic that only about 3 percent of women-owned businesses (vs. 6 percent of male-owned businesses) in the U.S. generate more than $1 million a year in sales. That is despite the fact that more than 10 million businesses in this country are at least 50 percent women-owned, and that these businesses employ 12.8 million people and generate nearly $1.9 trillion in sales annually.

As one of those 3 percent--I built my internet marketing company, NetCreations Inc., from a two-person homebased web design firm to a public company generating $58 million in annual sales--I always get asked the same question: Why do most women-owned businesses start at the kitchen table and never seem to go anywhere?

Part of the reason is the desire of many women to keep their companies small and manageable so they can spend time with their spouse and kids--a laudable goal. Other reasons are lack of access to capital and lack of financial literacy.

But I think there is something else going on: Few women business owners are willing to take the kinds of risks that men do. Whether that's because we're afraid we'll fail or because we're afraid we'll succeed beyond our wildest dreams, I don't know.

What I do know is that we need to conquer our fears. When I walked away from an offer to sell my company in 1999 and decided to do an IPO instead, I put everything on the line. It was a big risk, and I was scared to death, but it paid off.

I'm not saying to risk everything on a dream. I always urge my clients to plan their businesses carefully and take things one step at a time. But when that once-in-a-lifetime opportunity comes your way and you're perfectly positioned to hit the ball out of the park, swing for the fences.

Because there are worse things in life than having Hollywood make a movie about what a bitch you are or casting Meryl Streep to play you.--Rosalind Resnick

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This article was originally published in the January 2007 print edition of Entrepreneur with the headline: Women on the Rise.

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