A look at the exploding number of women business owners and the increasingly sophisticated network of female advisors, mentors, and venture capitalists who are helping them succeed.
New evidence suggests that a reliable business network for women--providing capital, know-how, and encouragement--is finally achieving critical mass. Company builders like Fran Lent are the proof
Fran Lent knew exactly what it would take to start her business. After nearly 10 years at Del Monte Foods and at Specialty Brands, she had decided to do for herself what she had done for others for so many years--create and market a brand.
Inspiration had come in the form of several futile trips to local grocery stores. Lent, a working mother of two who lives in Burlingame, Calif., couldn't find healthful convenience foods for her young children. Other discerning parents confirmed her perception of a clear market need, and Lent, who had always viewed her corporate career as a starting block for entrepreneurship, began to feel a fusion of opportunity and passion. She would create her own brand of frozen-food entrées for children. Wildly ambitious? Absolutely. "The cost of doing business in this industry is huge," says Lent. "It costs most large companies $250 million to build a brand." She didn't have nearly that much money. But she had something better. She had a network.
Ten years ago Lent's idea might well have played itself out on a much less ambitious scale in her kitchen. Like it or not, back then her chances of success would have been exponentially higher if she had been male, but not for the reasons we have come to believe. Sure, sexism and discrimination were--and still are--alive and well, but they were never the biggest barriers for female entrepreneurs.
Consider that at its very heart, business is predicated on relationships and access to resources. Entrepreneurial success lies not just in the power of a great idea but in one's ability to finance it, bring it to market, grow it. This is never a solitary pursuit; it's an intricate dance in which the performers are plucked as they are needed from a cast that one spends a lifetime cultivating--one's own personal network. We look for those who possess the knowledge we lack but who also share with us a common frame of reference. For women in business, that has always been tricky, not so much because men have deliberately excluded them but because that common frame of reference was so often missing. Regardless of intention, the effect was the same: an unlevel playing field.
But as Fran Lent has discovered, things are changing. The National Foundation for Women Business Owners (NFWBO) reports that from 1987 to 1996, the number of companies owned by women increased by 78% nationwide, with employment and sales in those businesses growing by 183% and 236%, respectively. According to NFWBO's research director, Julie R. Weeks, the growth in the number of women's companies outpaces the growth of all businesses by nearly two to one. Are women smarter, more ambitious, or more entrepreneurial than they have been in the past? Probably not. Rather, their networks, though always present, have become increasingly sophisticated and are now ramped up to provide everything from the most rudimentary business advice to new financing avenues.
When Lent was ready to start her business, the network she needed to make it happen was solidly in place--former coworkers, local women's business centers, an enlightened venture capitalist, a respected woman entrepreneur who wanted to help open doors. True, Lent was lucky. But she was also the beneficiary of resources that didn't exist until recently. Some have been created solely to assist woman entrepreneurs, others have evolved as a direct result of women's growing presence in the workforce, and still others have burgeoned in response to a perceived market opportunity. Whatever their genesis, those resources effectively nurture fledgling enterprises like Lent's, not simply because they are woman-owned but because they represent a previously unserviced niche. The network doesn't only help explain the growth in female-owned businesses; it also sheds light on what it takes for just about anyone to start a company.
The Career Network
What I hear from a lot of women is that they've gone through their corporate days, they've built a career, and now they want to start a business of their own," says Amy Millman, executive director of the National Women's Business Council, a federal-government advisory panel in Washington, D.C. In fact, a new study reveals that 22% of women who have started businesses within the past 10 years have had senior management experience, compared with only 13% of those who started businesses 10 to 19 years ago, and 11% of those who started 20 or more years ago.
Fran Lent is part of that growing segment--women who come to entrepreneurship via corporate careers and bring with them a critical mass of knowledge and contacts. "If I hadn't worked for Del Monte for so long, I never would have been able to do this," concedes Lent. "I pulled together nine consultants and made a virtual company, and they were all from Del Monte or Specialty Brands."
Ada Chang and Debbie Bliss, former Del Monte executives, helped Lent with operations and marketing, respectively, and Lorelle Del Matto, formerly with Specialty Brands, signed on as her registered dietitian. Lent also outsourced her initial formula development to Del Monte's R&D department, where a team of people who knew her well "really went the extra mile for me."
Another business contact, from a local office of a worldwide ad agency, moonlighted to work on her packaging and print-advertising campaign, and a handful of business associates helped her brainstorm to come up with a name for her company, now called Fran's Healthy Helpings Inc. "Everything I did in my corporate career I did to help me start my own company," says Lent. "It made me work even harder because I was using it as a training ground."
She left Del Monte in January 1994 to take a job at Specialty Brands specifically because the company had a reputation for allowing its employees to be entrepreneurial. "It was the first time I was able to take responsibility for a whole project," she recalls. Her assignment was to reposition the company's Durkee Spice line, a project that required her to manage a team of 30 employees for a year and a half and to travel from California to Bethlehem, Pa., once a month.
"I had to work with so many different constituencies to get this project done," she says. It looked very much like a trial run for starting her own company.
The Women's Business Center Network
Corporate contacts were just the beginning of Lent's networking efforts. "I joined every women's business group I could find," she recalls. And she found plenty. Through the Women's Economic Network, a private group in San Francisco, she gained access to CEOs in the food industry, who schooled her on servicing retailers. Karen Csejtey, the director of the YWCA's Women Entrepreneurs Program in Palo Alto, Calif., used her media contacts to help get Lent covered in the San Jose Mercury News. And at the Center to Develop Women Entrepreneurs, a mentoring program at San Jose State University, Lent met the CEO of a frozen-cookie-dough company who allowed her to warehouse her sample products for free.
Like most of their counterparts in other regions, those groups either didn't exist or were just in their infancy five years ago. Now more than 60 women's business centers are partially funded by the Small Business Administration and by countless more independent nonprofit groups that charge minimal fees, according to Harriet Fredman, deputy assistant administrator at the SBA's Office of Women's Business Ownership, in Washington, D.C. "There have always been small groups around the country, but now they're part of a larger network," says Fredman. Centers that receive SBA funding participate in a monthly conference call with Fredman's office and are also linked through a new Web site that Fredman says received more than 350,000 hits in its first three months.
For Lent, persistent networking at women's business centers opened up a world of contacts that moved her beyond her corporate frame of reference. For others, the centers serve an even more critical role, often training women who have little or no business experience. For instance, Marsha Florio and her partners, many of them former athletes, coaches, and teachers, worked with the Women's Business Development Center in Philadelphia for a year and a half before opening HerSport, a Haddonfield, N.J., sports specialty store for women. "We took a 12-week course at the center and came out with a business plan," says Florio. The course instructor, Linda Karl, used her banking connections to help the partners secure a loan, and center director Geri Swift introduced Florio and her partners to Sherry Black, another course graduate, who produces specialty gift items for women and girls in sports. Black is now a supplier to HerSport. "I don't think we'd be where we are if we didn't have the center as a stepping-stone," says Florio. "They've really taken care of us." The total cost for the course: approximately $500.
The Capital Network
Historically, women have cited the lack of access to capital as one of the biggest barriers to starting a business. "When we first started, women were getting love money and running up their credit cards to start businesses," recalls Hedy Ratner, director of the Women's Business Development Center in Chicago. "Now banks are less resistant, and women are a target market." Women's business centers that once focused almost exclusively on training and education are now more often doing their own microlending, using money they've raised through private investors, the SBA, or state economic-development agencies. They also link clients to the larger banking community through the SBA's prequalification and loan-guarantee programs. "A bank might now refer a client to us for more help on, say, a business plan," says Wendy Werkmeister, president of the Wisconsin Women's Business Initiative Corp. "In the past, she might just get rejected and never cross our radar screen."
Fran Lent's financing challenges were more complex than most founders', given the scale of her idea. Stock options from her husband's former employer yielded $100,000, but Lent needed close to $1 million in seed capital, and she was determined to raise it through the venture-capital community. Her networking efforts led her to F. Noel Perry, managing director at Baccharis Capital, a Menlo Park, Calif., venture-capital firm that is "very committed to funding women-led businesses," says Perry. Lent impressed him as "the quintessential entrepreneur," and he agreed to sponsor her presentation to Investors' Circle, an elite group of individuals committed to socially responsible investing. On the strength of her pitch, Lent landed the funding she needed from Baccharis Capital and another Investors' Circle member.
According to Investors' Circle founder Susan Davis, members' investments in companies led by women have grown from 2% to 25% in the past three years, an increase she attributes to a temporary spin-off of 15 female investors. "The women in the circle felt we weren't getting enough women-led deals," says Davis. "So they formed their own group and raised between $2 million and $3 million." After two years the women investors merged back into the larger group, bringing with them the contacts and experience that had originally eluded the larger group.
"One of the reasons women don't get money is that they don't have relationships within venture funds," says Patty Abramson, managing director of the Women's Growth Capital Fund, in Washington, D.C., who is also involved in the Investors' Circle. "I wouldn't say this is about discrimination; it's about not having the relationships, and business is about relationships. The way we see it is that there are women-owned businesses out there that are every bit as credit-worthy as male-owned businesses, but they just weren't getting in the door."
Abramson's group has raised $6 million from individuals and institutional investors and plans to grow that into a $25-million-to-$30-million fund with help from a Small Business Investment Co. and additional investments. The group's funds are earmarked specifically for expansion of woman-owned companies. Her male counterparts in the mainstream venture-capital community tell her that she'll have those deals to herself--that the kinds of companies she's interested in funding just don't come to their attention. But part of her mission is to make sure they do. "We spend an enormous amount of time creating relationships with other venture firms," she says. "We want them to invest with us."
Abramson is not alone. "There is an increase in funds being put together to invest in woman-owned businesses," says Nina McLemore, senior managing partner at Regent Capital Partners, a New York City venture-capital firm. "There are women in the banking field who now have the credentials to start their own funds, and they believe that there is a trend toward women starting businesses that these funds can invest in." Christine Cordaro, for instance, spent six years at a venture-capital firm and felt "there was an opportunity to create a fund around a market not being adequately served." With data provided by a venture-industry research group, she estimated that only 1.6% of venture money invested from 1991 to 1996 went to woman-owned businesses. So she founded Aurora Venture Partners in late 1996, raising about 80% of what will ultimately be a $45-million equity fund targeting companies owned by women. "I'm not doing this on a socially correct platform," she insists. "This is purely a business opportunity."
The Mentor Network
When Lane Nemeth founded Discovery Toys, 20 years ago, it never occurred to her to seek out a female mentor to guide her through the labyrinth of complex decisions that nascent entrepreneurs face every day. There simply weren't any readily available role models. Now Nemeth, the CEO of a $100-million company, receives on average one phone call a week from entrepreneurs seeking advice or an investment. A year and a half ago, Fran Lent was among them, and Nemeth, intrigued by the product, agreed to grant her a 15-minute audience. "In those 15 minutes, I saw myself at 30 and said, This woman has got to succeed," recalls Nemeth. "I would have killed for a mentor." That day, Nemeth agreed to sit on Lent's board of directors. "When she was first looking for venture capital, I helped her with negotiating strategies, and we talked through the wisdom of deciding who your venture capitalist will be," says Nemeth, who received venture funding for her own company. "We've talked through marketing ideas and joint-venture proposals. It's not that I'm that smart--I've just done it for 20 years, and I can keep her out of trouble."
Nemeth is among a growing number of seasoned female entrepreneurs who are now mentoring the younger generation. "I see an increasing number of women who are asking for mentors, for technical and network assistance," says Anna K. Lloyd, president of the Committee of 200, a Chicago-based national network of top woman executives and CEOs. In response, the group is launching a pilot mentoring program that will match three C-200 members with each protégé.
Most women's business centers also have formal mentoring programs that match successful company owners with their fledgling counterparts. "Our mentoring program started five years ago, and it's one of the most powerful things we do," says Wendy Werkmeister of the Wisconsin Women's Business Initiative. The organization has matched more than 100 early-stage entrepreneurs with mentors. Among them are Laura Farchmin, owner of Fairchild's Juice and Java, and Mary Jane Zvara, her mentor and the CEO of Creative Office Management.
Farchmin began working with Zvara last year, when staffing and cash-flow problems at her two-year-old coffeehouse had her "burned out and wondering whether I wanted to continue." Zvara helped her reduce turnover by implementing a new hiring and training program that cut the number of Farchmin's W-2s from 27 in 1996 to 6 last year. "One of the things you lose when you start a business is the benefit of having a boss--someone who has more experience than you do. She's someone to check in with," says Farchmin.
Fran Lent's products--three different frozen-food meals for kids--are now distributed in more than 300 grocery stores in northern California, and she expects Fran's Healthy Helpings to rack up $2 million in revenues this year. She talks to Nemeth every couple of weeks, is in touch with Patty Abramson about the possibility of an investment down the road, and still relies heavily on her former colleagues even though she has started hiring full-time employees.
The network has served Lent well, but it has changed somewhat since she first started her company: it has expanded and has started to include more men. And that was always the goal. The network didn't emerge so that those who felt excluded could take their marbles out of the big game and play on their own. It evolved as a bridge to a larger playing field where gender becomes virtually insignificant.
Donna Fenn is a contributing editor at Inc.
DONNA FENN is the author of Upstarts! How Gen Y Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009), about ways Gen Y is changing the entrepreneurial landscape.