At the height of the dot-com boom, it seemed like even a sock puppet could get funding. OK, sock puppets and the occasional woman entrepreneur.
Although women-run companies represent 40 percent of all U.S. businesses, according to a recent report only 6 percent of the companies receiving venture-capital funding in 2000 were headed by women.
And now that the dot-com bubble has burst, some women entrepreneurs fear that VC funding will become even harder for women to obtain.
Part of the problem, women entrepreneurs theorize, is perception. That concern led a group of businesswomen and academicians to study the problem.
A myth-busting report called The Diana Project came out of that study. It dispels some common misconceptions held by the VC community about women. The authors hope that bringing the misinformation to light will help improve the fundraising capabilities of women entrepreneurs.
"We were trying to rule out false perceptions," said Dr. Candida Brush, who co-authored the report. "If false perceptions exist, and myths persist, then the likelihood of women acquiring equity would continue to remain small. We want to improve women's chances of acquiring equity. Ruling out false perceptions is a first step."
The Diana Project is sponsored by the Kauffman Center for Entrepreneurial Leadership, the U.S. Small Business Administration and the National Women's Business Council. The research team includes Brush of Boston University, Nancy Carter of the University of St. Thomas, Elizabeth Gatewood of Indiana University, Patricia Greene of the University of Missouri at Kansas City and Myra Hart of Harvard University.
Among the common misconceptions highlighted by the report is the notion that women are less experienced in managing fast-growth ventures, when in fact many have reached top management positions, Brush said.
Another myth is that a mismatch exists between the kinds of companies women start and the types of firms that attract VCs.
In fact, more than half the ventures analyzed were business-to-business, rather than consumer focused. Fifty percent of the surveyed women-led businesses that received investments were in computer hardware/software services.
"Our evidence shows there are plenty of women creating businesses in the technology sectors that VCs might prefer," Brush said.
The infrastructure for women seeking capital has vastly improved in the last few years, Brush said.
In 1985, women received just 2 percent of total investments. In 2000, 6 percent of the $69 billion in venture capital funding went to companies with a woman CEO, according to Venture One estimates.
While the VC industry is commonly perceived as an exclusive boys club, more women are entering the industry, according to the report.
Also, women seeking equity capital are building extensive formal and informal networks, the report said.
Since Springboard began in 1999, the annual, women-only, venture-funding forum series has attracted more than 1,700 applicants, showcased 175 women entrepreneurs and attracted nearly 1,000 early-stage investors.
To meet this untapped demand, all-women angel investor groups, such as Seraph Capital, have emerged to consider investments in women-led ventures.
Still, some say recent changes in the market could leave some women behind.
"Only businesses building hard technology are getting venture money right now," said Valerie Buckingham, Founder and CEO of privacy startup MEconomy. "We're likely to see the same kinds of percentages of women that we had before, because there are fewer women in hard technology."
It's not that women seeking capital are uneducated, inexperienced or even lack the social contacts to build a credible venture, the report suggests. But more needs to be done to bring women entrepreneurs into the fray.
"The report has proven what we've been experiencing all along," said Kim Fisher, managing director of the Women's Technology Cluster. "The importance of building a network and getting women out in front of investors."
"Traditionally, women haven't had the networks," Buckingham agreed. "They didn't go to college with someone who ran a Fortune 500 business."
But that doesn't mean that women who lack an instant network are necessarily at a disadvantage.
"If a woman has as much experience as a man, there isn't necessarily a bias," Fisher said.
Professional organizations such as Springboard, the Women's Technology Cluster and the Forum for Women Entrepreneurs can help women establish a network.
"(These organizations) are essential in giving entrepreneurs that opportunity," Fisher said. "They're giving women-led companies instant access to a network of investors."
Joining the Women's Technology Cluster helped Valerie Buckingham to successfully launch her startup.
"It made a big difference for me to get the vocabulary, the frame of reference and the contacts," Buckingham said.
But although women entrepreneurs are advancing, it could be years before they can level their share of VC funding.
"We're playing a catch-up game," Buckingham said. "Women are gaining, but it's going to take time. In 20 years, there's going to be a very big difference."
