Facebook Twitter

Women winning some investors

But entrepreneurs’ numbers still low, according to study

SHARE Women winning some investors

Some women entrepreneurs are moving into the equity market and equity investors are getting more inquiries from them than in the past. But women-owned companies represent only 9 percent of all institutional investment deals and they get only 2.3 percent of institutional investment dollars, according to a new study.

The National Foundation for Women Business Owners placed 6,300 telephone calls to institutional investors and women business owners. The study was sponsored by Wells Fargo.

Equity investors fund businesses in exchange for a share of a company's ownership.

National foundation officials recommend that more women investigate getting venture capital and more investors take a look at the lucrative world of the 9.1 billion women owned businesses in the United States.

"The NFWBO report should serve as a wake-up call to accelerate the involvement of women entrepreneurs in the equity capital markets," said Nina McLemore, who heads NFWBO. "Women entrepreneurs should consider seeking investments and equity investors should recognize the market potential of these increasingly substantial women-owned firms."

The report also said that the companies chosen for the study were "prime candidates for equity," but only 11 percent are actively in the market with 6 percent of those having gotten equity investment and the remaining 5 percent seeking it.

Most women business owners who used money other than just their own for their firms said they got funding from family or friends, or an an individual "angel investor." One quarter of those surveyed said that corporate investors made equity capital investments in their company, and only 15 percent got equity capital from a venture capital firm.

The study also said the majority women who got equity capital were ready to relinquish day-to-day control over their businesses, had strong management teams, showed sound knowledge of the market and were persistent. They also tend to be younger than other women business owners, better educated, have newer businesses and more managerial experience in the corporate world before becoming entrepreneurs.

But Linda Galindo, a Utahn who is president of Healthcare Dynamix, says many women may be deliberately avoiding such funding because they worked so hard to escape the corporate world.

Galindo said many women entrepreneurs have created businesses that reflect their personal values, and want to run their own business their own way.

"The whole idea that we're not getting this money implies there's something wrong with the way we're going about it," said Galindo, who is a past president of the Salt Lake chapter of the National Association of Women Business Owners.

She said she "wouldn't even look at equity money" because she worked hard to establish a business that considers much more than the bottom line. "The second you get into the equity market, you're back in that corporate world again," she said. "I don't think women are naive about what it's going to take (to get equity capital). The whole focus of your business has to change and they're not going to give that up."

Galindo said she'd be open to working with an investor with a value system more like her own, but the people offering equity capital are not going about it in a way that is as attractive as it could be to women business owners.

"I stay as far away from it as I can because I'm having a blast even though I have to dog it out for the capital."

Another view is expressed by Nancy Mitchell, executive director of the Women's Business Center at the Salt Lake Area Chamber of Commerce.

Her experience with people starting new businesses shows that many rely on credit cards to get things rolling. "It's an easy way for business start-ups," Mitchell said. "I personally don't like it, but for people who can handle the credit and manage it, it works for them."

For one thing, there is little paperwork involved, unlike most loans which require a written business plan. In today's economy, it also is fairly easy to get a credit card with a low interest rate, possibly even 2.9 percent, and then transfer it to another with a low interest rate while the business grows. "A lot of women will go for microloans in the very early stages, but the microloans have an interest rate of 13 percent. When you are just starting a business, you're considered more risky and therefore you pay a higher interest rate."

The center helps women and men who want to start a business prepare a written business plan and marketing plan, as well as offer advice on how much money the potential firm will need and what types of financing are available, Mitchell said.


E-MAIL: lindat@desnews.com