Springboard Boot Camp Reveals Trends in VC Funding
Deborah Davis is representative of the majority of the women who attended the Springboard Enterprises boot camp in Los Angeles last December. She had never received venture capital, but she wanted to explore whether this type of money was what she needed to quickly grow Cleaner By Nature--her Los Angeles-based environmentally friendly dry-cleaning stores--from two to six locations in Southern California and eventually into a national chain.
At Springboard, Davis found her answer. In addition to meeting with investors and listening to their wants and needs, Davis was one of five women entrepreneurs who got an opportunity to "sell" their companies to a panel of venture capitalists in a two-minute fast-pitch session.
"I'm more confident now," says Davis, who had never done such a presentation before. "It was good validation, and I was able to practice [pitching] in a way that was so nonthreatening." Thanks to the boot camp, Davis, who started her company in 1996 with $150,000 and now boasts sales of $780,000 annually, connected with several potential investors who have expressed interest in her concept.
The VC world that Davis and the other women at Springboard's boot camp are trying to broach is startlingly different from what it was two years ago, say investors at Springboard. The VCs are more concerned about revenue, sound business models, and the strength and experience of a company's management team. The amount of money being invested in first rounds is significantly higher than in the past, but that money has to last longer.
According to Penny Pickett of the Telecommunications Development Fund in Washington, DC, fewer VCs are looking to invest in early-stage firms without revenues. You can also expect the term sheets to be tougher, and for underperforming companies to be "killed off" much more quickly, said VCs at the Springboard boot camp. "The previous exit strategies--being bought out by a big company--are not happening now," adds Pickett.
But these changes don't mean it's tougher for women to snag investors, says Marlene King of the Central Coast Venture Forum in Santa Barbara, California. On the contrary: "Women have more opportunity to get funding now that venture capitalists have made the shift away from technology companies."
Statistics from VC research firm VentureOne seem to bear out King's belief. In 2001, 7.89 percent of women-owned companies that got venture capital were in the products and services sector, compared to just 3.24 percent in 1997. By contrast, IT companies comprised 3.71 percent of the women-owned firms that got VC funding in 2001, down from 4.14 percent in 1997. And based on VentureOne numbers for the first half of 2002, the trend toward investing in products and services companies appears to be continuing.
The advent of more women as investors is also beginning to make an impact, adds Pickett. "Some of the women [in VC] are former entrepreneurs who cashed out of their companies, and they're knowledgeable and sophisticated investors. Women also control a lot more wealth in the country, and they're much better educated now on finance and money management."
Pickett also believes that one of the biggest hurdles women faced in the past--not being part of the networks of potential investors--is slowly being eliminated by organizations like Springboard Enterprises. Springboard president Amy Millman says the organization's venture forums and boot camps have led to 250 women-run businesses being funded in the past three years. "Our companies have raised $1 billion after presenting at Springboard, and these are connections they probably would not have made or wouldn't have known they could go out and find," says Millman.
While the picture is looking better in general, statistics from VentureOne confirm that with only 5.08 percent of venture-backed companies in 2001 having women CEOs, there is still work to be done.
Cynthia E. Griffin is a freelance writer in Los Angeles.