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Venture Capital Offenses Female entrepreneurs like ousted Zipcar C.E.O. Robin Chase find they're held to different standards by the male-dominated VC community.

By Carmen Nobel

As co-founder of the carsharing company Zipcar, Robin Chase was an entrepreneurial role model. With Chase as C.E.O., the company secured seed capital in 2000, allowing it to rapidly increase its number of cars in operation. Business magazines and women's groups heaped praise on her, and by the end of 2002, 170 Zipcars were zipping around Boston, New York, and Washington, while annual revenues had grown to $2.1 million.

But that same year, a big round of financing fell through and a new group of investors joined the board. In January 2003, the board ousted Chase as C.E.O. in a split vote that chagrined initial investors. Some suggest she was discriminated against because she was a woman.

"They decided she wasn't 'fundable' enough," says former Zipcar board member Paul Davis, a general partner at Cambridge, Massachusetts-based Seed Partners, which supplied A-round funding to Zipcar. "But the company was performing to ambitious plans."

According to Davis, Chase's gender played a clear role in her ouster. "She wouldn't have been as vulnerable if she had been a guy," says Davis, who has spent eight years in the venture capital business. "Robin proved better at operations than anyone at any company I'd ever seen. It would have been really hard to take out a male C.E.O. who was putting out as aggressive numbers as she was, and meeting them." (For its part, Zipcar denies sexism was a factor, saying the company simply needed a stronger manager who could raise additional funding and "take the company to the next level.")

Chase herself demurs at the suggestion of sexism, instead choosing to focus on personality differences with the new board members. But the numbers speak for themselves when it comes to the degree to which raising venture capital remains a man's game.

Of the 2,338 U.S. companies that raised venture funding in 2006, only 6.5 percent of them had a female founder and only 4.3 percent had female C.E.O.'s, according to research firm VentureOne, down from 8.5 percent and 8.0 percent in 2002, respectively. This is despite the fact that women comprise roughly half of all small business owners in the U.S., although, to be fair, far fewer of them actively apply for funding, according to Amy Millman, president of Springboard Enterprises, a Washington, D.C.-based non-profit which supports female business owners' efforts to secure funding.

Female entrepreneurs interviewed for this story say that getting venture funding can be more difficult for women, and that they were often judged by different standards once they had secured funding and were running their companies.

One female founder of a venture-funded software company on the East Coast says that after she willingly stepped aside as C.E.O. for a new chief with more management experience, she noticed something disturbing-there wasn't much new about the new C.E.O. other than his gender and his macho turns of phrase.

"The new C.E.O. would say the same things as I did, but he swore more," says the entrepreneur. "He made a lot of mistakes, but they were all forgiven." Like others interviewed, the C.E.O. was reluctant to have her name used for fear that being seen as a complainer could hurt their current or future efforts to raise funding.

"There are some who have talked to people about bad experiences that they have had, and it comes back to bite them when they come back to try again," says Springboard's Millman.

It's tough to dispute that the VC community is a tight-knit group of mostly men, which can lead to inadvertent prejudice when it comes to funding. Among the ten largest VC companies in the country by assets managed, for example, only about 11 percent of the partners and managing directors are women. "People do tend to gravitate toward their own, who they're comfortable with, and who have similar life experiences," says Randolph Werner, a former general partner at Dominion Ventures Inc., and a current member of the eCoast Angel Network in Portsmouth, New Hampshire. "Venture people are just like everybody else."

Venture deals require networking, and it's harder for women to break into the network, even if they're talented and do their homework, since the network comprises mostly men.

"For all the VCs I've talked to in my career, I have yet to talk to a woman VC," says Liz Cobb, C.E.O. of Makana Solutions, a sales software company based in Lexington, Massachusetts. Makana is the third company Cobb has founded and the second for which she received venture funding. "I look at all these VC Web sites, and I look at the partners, and they're almost all men. It's very rare that a woman is doing the investing."

Diane Hessan, the C.E.O. of corporate networking company Communispace, agrees that the venture capital industry can be like an old boys' network. Her company secured VC funding in 2000 but only after a prolonged search.

"People are more likely to invest in people they know," Hessan says. "If you have friends and business colleagues and a network of VCs, then you'll get a meeting. If you don't hang out with VCs and don't have them in your network, then.the probability will go down."

Advisors counsel female entrepreneurs to not let the extra challenges they face bother them, and just focus on their strengths.

"I counsel young women, and I tell them I really believe you have to ignore it," says Venetia Kontogourgis, the sole female managing director at venture firm Trident Capital, who also has experience founding a company. "Just smile, and move on, and keep going. Otherwise it gets into your system."

Zipcar's Chase has taken Kontogourgis' advice to heart, moving on to found a new venture-a rideshare company called GoLoco-and says that she's having a much easier time with funding than she did at ZipCar. People know who she is now, and her previous experience helps a lot.

"[VCs] look at proven leaders," says Communispace's Hessan. "That's not whether you have done a good job managing a company before, it's whether you've successfully built a business in the past successfully. And guess what? The people who have done it before are mostly men."

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