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WOMEN MAKE CAPITAL
CONNECTIONS.
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By Pam Droog
When Barbara Pierce founded Millennium Communications Inc. in 1993,
she bypassed her bank for start-up funding and instead withdrew
$20,000 from her retirement annuity account. “Essentially I borrowed
from myself on a five-year note with quarterly payments,” Pierce
says. “The six-percent fixed rate was much more competitive than
a bank, and I didn’t have to put up any collateral.” She’s also
used the retirement account for business expansion.
BARBARA
PIERCE
founder
Millennium Communications
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Jenny Oberschelp and her sister Chris Krone did go to a bank to
start Made By Me walk-in crafts studio one year ago. At first they
went to the Small Business Administration for funding. “We heard
they were [loaning money] to women- and minority-owned businesses,”
Oberschelp says. However, the SBA wanted Krone to use her house
as collateral and its interest rates were high. Eventually the women
talked to 10 banks. “You know you have a good idea when bankers
get excited,” Oberschelp says. Pioneer Bank loaned the sisters $250,000.
Still other women, like Vicki Gonzalez, chief operating officer
of Graphic Surgery, LLC, are turning to angel investors and venture
capital for their business startups. Graphic Surgery, LLC, was founded
in 2000 in New York and relocated to the NIDUS Center in 2002. The
company was started by neurosurgeons Patricia Gelnar and partner
Carl Lauryssen. Among other services, Graphic Surgey educates employers
and employees about making better healthcare decisions to help stem
the rising cost of healthcare.
"RIGHT
NOW THERE ARE SO MANY PEOPLE PULLING TOGETHER TO HELP
GIVE THIS REGION A BOOST IN THE AREA OF BIOTECH STARTUPS,
AND BRINGING IN NEW PEOPLE. THEY FEEL STRONGLY ABOUT
ENTREPRENEURS SUCH AS PATTI AND THEY'RE WILLING TO
GIVE BACK TO THE COMMUNITY FOR PEOPLE LIKE HER."
Vicki Gonzalez
CEO
Graphics Surgery, LLC
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Venture One, a leading equity research firm, says women-owned businesses
currently receive nearly 10 percent of all venture capital funding.
That number will continue to rise since women-owned firms are the
fastest-growing sector of the United States economy, says the National
Foundation of Women Business Owners. In fact, based on figures from
Springboard Enterprises, women own 46 percent of all U.S. businesses.
“I actually think women have as good or better opportunities as
entrepreneurs than they do in the corporate setting. Women are less
constrained about starting their own companies and are creating
very compelling new venture opportunities,” says Ken Harrington,
director of the Skandalaris Entrepreneurship program at Washington
University. He doesn’t see any bias against women entrepreneurs.
“My sense is good deals, even in hard times, are always quickly
funded,” he says.
But there still are certain challenges for women entrepreneurs.
Investors surveyed in a study by the Center for Innovation and Entrepreneurship
cited lack of management experience as one reason women don’t get
funding. The CIE study suggests women may be penalized for trying
to balance workplace and personal commitments.
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Jenny
Oberschlep and her sister Chris Krone started Made
By Me walk-in crafts studio one year ago. |
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The CIE study also concluded women entrepreneurs need to learn to
network more effectively to raise money—which brings up the so-called
old boys network.
“Investors need to quickly validate opportunities and management
teams, so to the extent men have more connections, then a man would
have an advantage. That may be where the old boys network may come
in,” Harrington says.
Christine Walsh agrees—to a point. She’s executive director of the
InvestMidwest Venture Capital Forum, which brings together entrepreneurs
and venture capitalists, bankers and investors. “We tend as women
to overemphasize the impact of the old boys network. But the reality
is that 30 years ago, a smaller percentage of women went into careers
in business and so the number of women colleagues an individual
may have is more limited. As the number of women in business increases,
I believe women will form stronger networks of women colleagues
and counter the effect of the old boys network.”
So where do women go for startup capital? Walsh says, “My impression
is they do exactly what male entrepreneurs do and work every connection
they have.”
That’s what Gonzalez of Graphic Surgery did. Once the company had
a business plan the next step was to raise money. “We spent a lot
of time talking to people we knew,” she says. “What seemed to work
for us was networking at various angel groups in the Midwest.” The
company participated in the InvestMidwest Venture Capital Forum
in 2003 and was accepted into the Springboard Women’s Venture Capital
Forum in Chicago, sponsored by Springboard Enterprises, a national
nonprofit organization that helps women entrepreneurs gain access
to seed, first- and second-round investors. “Patti and I do not
consider the fact that we are women as an advantage or disadvantage.
We applied for Springboard because it offered us the opportunity
to hone in on our message,” Gonzalez says.
For example, the women met with several coaches from St. Louis “who
sat with us not once or twice but several times and gave us hard,
honest feedback about what worked or didn’t in our presentation,
and how to change it,” Gonzalez says. “It was beneficial but brutal.”
The coaches included people from Prolog, Capital for Business and
other venture capital funds. “After going through this process,
the actual presentation was anticlimactic,” she adds.
Gonzalez has raised $725 thousand from the angel network she has
established. But, she says, “The real value comes from networking.
I can’t say enough about how critical that is, whether you’re a
man or a woman.” She advises, “Start with your inner circle and
trusted advisors and ask them who else you should talk to.” Also,
“People invest in people so putting together and selling a good
team is critical,” she adds. Finally, Gonzalez says, “Take time
up front to put together a credible business plan and be able to
communicate it very effectively.”
In general, Gonzalez says, the St. Louis region is a great place
to launch a new business and raise startup funding. “Right now there
are so many people pulling together to help give this region a boost
in the area of biotech startups, and bringing in new people,” she
says. “They feel strongly about entrepreneurs such as Patti and
they’re willing to give back to the community for people like her.”
However, Walsh cautions, “It takes a tremendous amount of perseverance
to be an entrepreneur—and a little luck helps too.”
Pam Droog is a frequent contributor to St. Louis Commerce Magazine.
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