Six years later Chicago-based Inroads is the largest of the women-oriented funds, with $50 million under management. Women's Growth Capital Fund, in Washington, D.C., followed Inroads' lead in 1997, investing $18 million in 13 companies. A year later San Francisco's Viridian Capital added $30 million to the pot. New entrants since 1999 include Cincinnati's Fund Isabella, with $10 million, and Boston's Axxon Capital, which at press time had just closed its first $12-million fund.
Concerned that their missions might be misunderstood, these funds' managers emphasize that they're not interested in special-needs cases. "We get lots of callers who say, 'I am a woman, and everyone else has turned me down, and you need to help me," says Patty Abramson, cofounder of Women's Growth Capital Fund. "But we're not looking to invest in companies nobody else wants to fund. We're in the deals to make money."
"People always assume that there's a double standard if you focus on something crazy like women," agrees Wang. "Our investment criteria are the same for all our companies."
Indeed, two-thirds of Inroads' investments are in businesses founded or run by men. Diversity helps the fund stay in the thick of the deal flow, and that, in turn, builds credibility for its VCs and all its portfolio companies. "We view ourselves as a conduit for non-women-focused funds to invest in these companies as well," says Wang. "When we call our colleagues on the West Coast and ask them to look at a deal, they pay attention, because it's come to them through the old referral network."
That's not to say women-led venture funds have found acceptance more easily than the entrepreneurs they back. When former securities broker Sheryl Marshall started scouting institutional investors for Axxon Capital, she says the reaction among many was, "Ugh! A venture fund focused on women? How can that be successful?"
But Marshall sees her gender as an advantage. Like some investors and entrepreneurs, she believes that women are sometimes quicker than men to detect the promise in other women's ideas. She recounts, for example, how male VCs scratched their heads over one woman's plan to start an online wedding registry -- a concept that appealed to Marshall instantly. Says Dorothea Herrey, a VC at Scripps Ventures: "We've seen a couple of deals in retail fashion where my female colleague and I had different reactions than the men in the room. We get the business better because we are the target consumer." And that perspective should matter to all VCs, since women are the chief household buyers and account for roughly half of all E-commerce purchases.
Even as they savor their niche market, VCs at women-centric funds hope their successes will lure other investors to back women-owned companies too. And, in fact, that's already happening: in April, New York City's Flatiron Partners announced a $20-million standalone fund exclusively for start-ups led by women and minorities. But widespread enthusiasm may be constrained by the paucity of female partners in traditional firms: women account for less than 20% of the nation's VCs. "I've got to believe that having decision-making, deal-doing women partners will influence VCs' perceptions of women in leadership roles," says Wang. Women-focused funds on their own "have not made much progress," she adds. "It's still a severely undertapped market."
Sevin Rosen's Roberts is nonetheless optimistic. "I think about it in terms of the progress that we've made," she says. "The face of venture firms is changing -- by age, ethnicity, and gender. It doesn't feel as inhospitable as it once did."
Whereas it can take years to make partner in a VC firm, angel investors are born overnight. And they're being born all across the country as women with accumulated wealth invest in new companies, many being started by people like themselves. The leader of the pack is the 100-member Seraph Capital Forum, assembled a year ago by Susan Preston, CEO of Reality-Based Learning Co., an education company in Redmond, Wash. Preston's motive was to get more women involved with start-ups in the Seattle area, where "there are only about four women VCs," she says.
Every Seraph angel meets the net-worth requirements of an accredited investor, but that doesn't necessarily translate into expertise. Before joining Seraph, "some of these women had never made a financial decision by themselves," says Preston. The angels are strongly encouraged to attend Seraph's lunches, classes, and seminars at which local VCs and partners from law firms and big-five accounting firms drill them in evaluating management teams, analyzing financial documents, and diversifying investment portfolios. "Our goal is to give them the education and information to help them make intelligent investment choices for themselves," Preston says.
Thus equipped, individual angels have so far invested in 18 companies, plunking down as much as $500,000 each. Although Seraph claims gender-blindness in choosing opportunities to present to members, women CEOs have knocked on its door in disproportionate numbers, and just over a third of the companies invested in count women among their founders.
Seraph appears to have started a trend: there's talk of similar groups sprouting up in New York and San Francisco. In the Washington, D.C., area, WomenAngels.net was completely booked after just a couple of breakfast meetings, with 90 members possessing varying degrees of investment experience and ranging in age from 25 to 65. "We were so oversubscribed that we think we're going to have to do another one," says organizer Esther Smith, a managing partner at investment relations firm Poretz Group, in McLean, Va. Each angel has agreed to put in $25,000 each year for three years, becoming equal partners in a fund that made its first private investment in May.
But it will take more than female angels, or any other single force, to bring women's access to capital up to par. "I don't think it's going to change dramatically until women have a greater presence in all areas, from angel financing and venture-capital firms to government, law, and Fortune 500 companies," says Preston. She and others focused on parity recommend that every area with a concentration of VCs also host incubators similar to the Women's Technology Cluster; networking and support groups akin to the Forum for Women Entrepreneurs; and venture funds and angel groups that target companies in which women are significant stakeholders.
