Women & Venture Capital

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Nothing Ventured, Nothing Gained
Companies owned by women are the fastest growing segment of the business world and account for 38 percent of businesses in the United States, but they get less than 4% of the $14 billion in venture capital invested each year. Women currently own and/or lead fifty percent of all businesses in the US, and in each of the top 50 US metropolitan areas, women-owned businesses are growing faster than the overall economy. Between 1988 and 1998, the number of women-owned companies grew from 4.5 million to 8 million, according to the Forum for Women Entrepreneurs. But just last year, only between two and four percent of approximately $12.5 billion in venture capital went to women-owned business. Venture capitalists say the biggest problem is that women entrepreneurs aren't asking for cash -- or don't know HOW to ask.

What is Venture Capital?
A venture capitalist gives financial backing and management assistance to young, rapidly growing companies. Unlike a bank that makes loans that get repaid as debt, a venture capitalist owns a portion of the company in which he or she invests. Venture capital is an important source of equity for start-up companies. Economists and business experts say that little financing has flowed to women-backed startups because historically, women entrepreneurs chose industries in which venture capitalists rarely invest. For example, retail, where there's often little opportunity for growth. According to the National Foundation for Women Business Owners (NFWBO), the fastest growing markets for women entrepreneurs are construction, wholesale trade, transportation, communications, agriculture and manufacturing. If a woman doesn't pick the right industry, her assessment of her business may not match the needs of venture capitalists. Also, the venture capital system depends upon networking, a skill which analysts say too many women lack. Considering a joint study from the Catalyst Organization for Advancing Women and NFBWO, many women feel they are not taken seriously as businesspeople and too often hesitate to assert themselves in securing financing backing in industries that have virtually ignored women.

Venturing Out
That's why Sheryl Marshall, managing director of Axxon Capital, says women need to start and support their own venture capital funds. Marshall says women's venture capital funds are the best way women can establish credibility and ensure they have the capital to finance their own business ventures. Currently there are only a few such organizations in the U.S., but that is fast changing. Axxon Capital and Strategic Capital Resources, are two such groups, and the Women's Growth Capital Fund is the oldest and most well known, in existence since 1997. And the Internet is playing a huge role in all of this. New business these days means the Internet, and it's in the Internet and technology sectors that many women are seeking capital for, and investors giving money to. So, the Internet has really been leveling the playing field when it comes to giving women access to capital. There are a number of national conferences, like Springboard 2000, which are bringing together women entrepreneurs and potential investors to offer advice and strategize about how to push women-owned businesses forward in the Information Age.

LINKS AND RESOURCES
Capital for Women-owned Businesses:

Capital Across America

Viridian Capital

New Vista Capital

Women's Growth Capital Fund

Isabella Capital LLC

Cambridge Incubator