Clearing the Hurdles: Women Building High-Growth Businesses

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"Even in the 21st century, much of the world still systematically excludes 50 percent of the smartest people from full responsibility. Entrepreneurship rewards excellence and results, not gender, and this book is a wonderful gift to women who would like to respond to corporate America by saying, 'Thanks, I'll do it myself'."
Jim Collins, Author, "Good to Great", and Co-author, "Built to Last"

"Savvy and inspirational, Clearing the Hurdles is an important book for women intent on growing new businesses. The team...

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Overview

"Even in the 21st century, much of the world still systematically excludes 50 percent of the smartest people from full responsibility. Entrepreneurship rewards excellence and results, not gender, and this book is a wonderful gift to women who would like to respond to corporate America by saying, 'Thanks, I'll do it myself'."
Jim Collins, Author, "Good to Great", and Co-author, "Built to Last"

"Savvy and inspirational, Clearing the Hurdles is an important book for women intent on growing new businesses. The team of talented authors provides information, insights, and advice that will educate, motivate, and challenge women aspiring to become successful entrepreneurs."
Laura Tyson, Dean, London Business School

"With women creating new businesses at a faster rate than males, it is imperative that today's venture capitalists take an active role in mentoring and recruiting women to become venture capitalists, business owners, technologists, entrepreneurs, and government leaders. Clearing the Hurdles is not only a wake up call; it is a roadmap to start this long overdue project."
Mark Heesen, President, National Venture Capital Association

"Clearing the Hurdles examines all elements behind the lack of access to capital for women entrepreneurs who want to build high-growth companies. If you are a woman who has a vision for a high-potential business, this book was written for you."
Connie Duckworth, Kathy Elliott, Sharon Whiteley, Founders, 8Wings Enterprises, and Co-authors, "The Old Girls Network: Insider Advice for Women Building Businesses in a Man's World"

"Clearing the Hurdles debunks the myths and defines the barriers that entrepreneurs confront--a perfect roadmap for women embarking on the entrepreneurial journey."
Kay Koplovitz, Founder, USA Networks, and former Chair, National Women's Business Council

Starting, funding, and growing a new venture are significant challenges for every entrepreneur. For women, the hurdles are even higher, due to widely held perceptions about them, their capabilities, and their businesses. Now, five leading experts on women entrepreneurs offer systematic solutions to the challenges, offering timely advice to women dedicated to achieving success and claiming the rewards.

Clearing the Hurdles draws on five years of original research, performed as part of the Diana Project--a major initiative that explores ways women grow businesses.

The authors identify key factors associated with funding, growth, and success: the founder's goals, expertise, and commitment; strategic direction; team building; effective use of networks; and access to capital. Most important, they offer concrete strategies for overcoming obstacles: strategies proven in the marketplace by women entrepreneurs. Wealth creation: Don't get left out!

  • Learn what it takes to build your high-growth business
  • Get credible
  • Fill the technical and management gaps in your expertise
  • Get strategic
  • Choose the right business, build the right plan
  • Get connected
  • Link yourself to the right resources, networks, and people
  • Get over the funding hurdles.
This book is a training manual for women who want to claim their place as winners in the entrepreneurial challenge.
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Editorial Reviews

Library Journal
Five years of collaborative research have led the five authors, all consultants to women entrepreneurs, to identify the myths and realities confronting these women. To help them start, fund, and grow a new venture, the authors have compiled solutions to basic business challenges. They explore the key factors in success-the founder's objectives and expertise, financial resources, goal setting, networks, and management teams-while also explaining the strategies needed for success, including creating wealth, building credibility and networks, and choosing the right business and the right plan. Case studies are used throughout. An additional highlight is the detailed explanation of the venture capital process and industry. A wealth of endnotes for resources in print and online will lead readers to more and specific information sources. Most business collections will want to add this organized, well-researched, thoughtful work.-Susan C. Awe, Univ. of New Mexico Lib., Albuquerque Copyright 2004 Reed Business Information.
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Product Details

Meet the Author

Dr. Candida Brush is Associate Professor in the Strategy and Policy Department, Boston University School of Management. She is the Founder and Director of the Council for Women’s Entrepreneurship and Leadership and Research Director for the Entrepreneurial Management Institute.

Dr. Nancy M. Carter is the Richard M. Schulze Chair in Entrepreneurship at the University of St. Thomas, Minneapolis, MN, and is Leverhulme Visiting Professor at the London Business School. She previously held the Coleman Foundation Chair in Entrepreneurial Studies at Marquette University where she directed the Center for the Study of Entrepreneurship and the Center for Family Business.

Dr. Elizabeth J. Gatewood is Jack M. Gill Chair of Entrepreneurship and Director of The Johnson Center for Entrepreneurship & Innovation at Indiana University. She has served as Executive Director of the University of Houston Small Business Development Center and was the founder of the Women’s Roundtable Program. She founded and directed the Center for Business and Economic Studies at the University of Georgia.

Dr. Patricia G. Greene is Dean of the Undergraduate School at Babson College. She formerly held the Ewing Marion Kauffman/Missouri Chair in Entrepreneurial Leadership at the University of Missouri--Kansas City and the NJ Chair of Small Business and Entrepreneurship at Rutgers University. Prior to her academic career she was active in starting, growing, and managing long-term care facilities.

Dr. Myra M. Hart, Class of 1961 Professor of Entrepreneurship at the Harvard Business School, currently leads the school’s Models ofSuccess initiative and directs the writing of case studies featuring women protagonists. A founding officer of Staples, she participated in raising multiple rounds of venture capital, served as VP of Operations, and led the early expansion as Group VP of Growth and Development. She is also chair of the Center for Women’s Business Research.



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Table of Contents

Preface xix
Chapter 1 Women Becoming Entrepreneurs 1
No Glass Ceilings Here 1
An Entrepreneurial Venture Begins 3
Venture Growth Is a Choice 5
Women-Led Ventures 7
Slow to Grow 8
Are There Changes in the Offing? 9
Private Equity--The Last Big Hurdle 10
Angel Investing 10
Venture Capital 10
The Hurdle Analogy 12
The Plan for This Book 13
Notes 15
Chapter 2 Women Entrepreneurs: Pathways and Challenges 17
The Entrepreneur 18
Aspirations and Goals 18
Capabilities 19
Strategic Choices 20
The Venture Concept 20
Industry 21
Resources 22
Hurdles to Overcome 24
Motives, Aspirations, and Commitment 25
Human Capital 25
Financial Knowledge and Business Savvy 26
Growth Orientation and Strategies 26
Social Capital and Social Networks 27
Building a Management Team 27
Funding Connections 27
Higher Hurdles for Women 28
Why Are the Hurdles Higher? 31
Parents 33
Peers 33
Education 34
Media 35
Work Experience 36
Winning the Race for Success 37
Notes 38
Chapter 3 Funding Sources for Businesses on the "Grow" 41
Money and the Start-Up Process 44
Growth Capital versus Start-Up Funds 46
A Strategic Approach 46
Bootstrap Financing 48
Credit 50
Institutional Debt 51
Equity 52
Sources of Equity Capital 53
Angel Investing 54
Government-Supported Investments 58
Hybrids: Government-Supported Venture Capital 58
Venture Capital 59
Notes 65
Chapter 4 Motives, Aspirations, and Commitment 67
The Entrepreneurial Choice 70
Motives for Entrepreneurship 72
Women's Aspirations Contrast with Entrepreneurial Reality 74
Family Role Expectations 76
Women's Self-Expression Leads to Perceptions 77
Truths and Realities 79
Moving Beyond the Expectations 82
Summary 86
Notes 87
Chapter 5 Women and Human Capital 89
What Do Resource Providers Look For? 90
Assumptions about Women Entrepreneurs 93
Sorting Fact from Fiction 95
Education 95
Experience 98
Overcoming the Hurdle 102
Assessing Your Education and Experience 104
Enhancing Your Human Capital 108
School 108
Training 108
Work Experience 109
Summary 110
Notes 111
Chapter 6 Financial Knowledge and Business Savvy 113
Challenges Built into the System 114
Do Women Underinvest in Their Businesses? 115
Do Women Have the Requisite Financial Knowledge, Skills, and Experience? 120
Separating the High Potential, High Performers from the Rest 125
The Springboard Survey: A Study of Women Entrepreneurs Leading High-Potential Enterprises 128
What Can Women Do to Clear the Financing Hurdles? 133
To Overcome Any Shortfalls in Initial Funding 133
To Demonstrate Financial Knowledge and Management Savvy 135
To Overcome Concerns about Ability to Manage Risk 137
Notes 137
Chapter 7 Growth Orientation and Strategies 141
Are Women-Owned Firms Smaller? 144
Why Are Women-Owned Firms Smaller? 145
Why Are Women-Led Ventures Perceived Differently? 147
Women Aren't Serious about Growth 148
Women Are Better at Low-Tech Service Ventures 150
The New Generation of Women Entrepreneurs 151
Strategies for Growth 154
Ambitious Strategy 158
Deliberate Strategy 159
Variable Strategy 160
Maintenance Strategy 161
Overcoming High Hurdles 162
Summary 164
Notes 164
Chapter 8 Building Useful Networks and Cashing in on Social Capital 167
Are Women Unplugged from the Right Networks? 170
Formal Networks 172
Informal Networks 173
Benefits of Networks 174
Network Boundaries and Barriers 175
The Case for Homogeneous Networks 177
The Case for Heterogeneity 178
Social Capital--The Currency of Network Exchange 179
Reputation and Trust 181
Spending Social Capital within a Network 182
Some Networks Are Like Foreign Countries 183
Women Have Diverse Networks 184
Women Benefit from Strategic Sponsors 185
Creating Effective Networks 187
Notes 189
Chapter 9 Women Building Management Teams 191
Perceptions about Women 195
Women Don't Want to Share Ownership 195
Women Don't Recognize the Types of People Needed 196
Women Are Outside the Networks 196
Women Just Don't Have What It Takes to Lead a Growth Venture 197
Fact and Fiction about Women and Teams 198
Building a High-Potential Team 202
Challenges in Team Formation 205
Summary 206
Notes 207
Chapter 10 Networking for Venture Capital 211
A Brief History of Venture Capital in the United States 212
Tracing the Roots of the Industry 212
The Context of Growth 213
Understanding the Investment Process 214
Risks and Rewards of Venture Capital Financing 215
The Cultural Context for the U.S. Venture Capital Industry 216
Venture Capital Cycles 217
Building Partnerships, Professional Staffing 218
The Venture Capital Community Today 219
Women in the Venture Capital Industry 220
The Pioneers 220
Implications 223
Getting Access to Venture Capital Investors 224
A Connection or a Disconnect? 226
Missing Links between Women Entrepreneurs and Venture Capitalists 229
Do You Know the Right People? 229
Getting Connected 230
Do They Know You? 231
Model Misfits 231
Getting to Yes 231
Can Women Venture Capitalists Change the Equation? 233
The Research Process 234
Performance Review 240
What Next? 241
What Can You Do to Change Things? 242
Investigate Organizations That Provide Support 242
Build Entrepreneurial Connections Now 243
Do Additional Venture Capital Research and Make Contact 243
Notes 244
Chapter 11 In Conclusion 247
Note 253
Index 255
About the Authors 271
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Preface

Why do we care so passionately about women and high-growth enterprises? Because entrepreneurship is a driving force in the growth and prosperity of the nation. Because entrepreneurs create innovative products, provide new jobs, and gain substantial financial rewards for themselves and their partners in the process. And especially because, for women, there is a significant gap between the number who start new ventures and the number who are able to achieve high growth and substantial success.

Entrepreneurs as Heroes...

You know their names today, even though they made their mark 100 years ago and more. Cornelius Vanderbilt (railroads), Andrew Carnegie (steel), John D. Rockefeller (oil), Marshall Field (retailing), and Henry Ford (automobiles) left an enduring legacy of innovation, market dominance, and vast fortunes. They are among a handful of extraordinary entrepreneurs who not only achieved great wealth, but also won international celebrity. Whether you think of them as robber barons or heroes, these men who developed railroads, steel, oil, large-scale retailing, and automobiles continue to have a star quality associated with their names more than a century later.

The creation of new ventures is deeply embedded in our American heritage. The exciting part is that it is even more vibrant and widespread today than it was in the days of Rockefeller, Field, and Ford. Ever-expanding technology, support from government policy and regulations, and the redefinition of corporate America in the 1980s and 1990s made the United States a hotbed of innovation and new venture creation. Entrepreneurs, armed with promising new business concepts, luredby vast new market opportunities, and convinced of huge financial payoffs, launched millions of new ventures in the past 20 years. That they did so in an environment rich with resources—both public and private—added to the likelihood of their success. Some of the most celebrated contemporary venturers are Steve Jobs (Apple, Pixar), Bill Gates (Microsoft), Jeff Bezos (Amazon.com), Howard Shultz (Starbucks), and Michael Dell (Dell Computers).

In our hearts, we know that the kind of entrepreneurial success these men achieved is reserved for a very few. We sometimes think of them as the lucky ones, but we also recognize their focus, talents, and personal efforts. Looking only at their successes, it is easy to imagine that they hurdled over all obstacles in their race to develop new products and services, and then build new markets and industries. However, that was not really the case. Their successes were built on astute observation, practical application, and hard work. Each drew on personal resources, but when that wasn’t sufficient, enlisted the help of others. Each one confronted failure more than once, but never accepted it as final.

Entrepreneurs starting new ventures today aspire to that same rarified air of success, but at the same time they recognize that these cultural icons are nothing short of heroic. The biggest winners among entrepreneurs are celebrities precisely because they are so unique in their accomplishments.

Why This Book?

Did you notice? The names on the preceding lists are all male. True, only a select few entrepreneurs become heroes—but it is also true that heroines are almost entirely absent from the list! With the notable exception of a handful of dynamos in the cosmetics (Madame C. J. Walker, Helena Rubinstein, Estee Lauder, Mary Kay Ash) and fashion industries (Coco Chanel, Liz Claiborne, Donna Karan), women have not been significant players in the world of high-stakes entrepreneurship. More recently, Carol Bartz (AutoDesk) and Meg Whitman (eBay) have become standouts in technology-based ventures.

We didn’t set out to write a book. We simply wanted to find out why women, who in 2003 were majority owners of 28% of all businesses in the United States (and, if women with 50% ownership shares are counted, the total climbs to 46% of all privately owned businesses),1 were neither reaching the highest levels of entrepreneurial success nor achieving business celebrity in numbers proportionate to their start-up activity. What factors can explain this success gap for women entrepreneurs? One of the most obvious of the hurdles that women struggle with is the acquisition of key resources—particularly financial resources—so important to growth. For example, five years ago, in the heat of the venture capital rush to fund promising new enterprises, women entrepreneurs received less than 5% of the billions of dollars invested.

Why do we care about this? We are five professors who have spent our professional careers investigating the levers of success in entrepreneurial growth (Candida Brush, Boston University; Nancy Carter, University of St. Thomas; Elizabeth Gatewood, Indiana University; Patricia Greene, Babson College; and Myra Hart, Harvard Business School). In 1998, we decided to work together to investigate why women, who are definitely intent on climbing the ladder of entrepreneurial success, are having so much trouble getting to the top of it.

We agreed to turn our collective attention to the question of why there are so few heroines in the history of entrepreneurship. Even more important to us was the question of why contemporary women, who are starting new businesses in droves, are not highly visible among the ranks of the high-growth, high-potential entrepreneurs.

Each of us brings a different lens to the investigation. Dr. Greene is a sociologist whose work has included studies of entrepreneurship in minority communities. Dr. Brush has a long history of studying women entrepreneurs. Dr. Hart is an academic with practitioner roots. She has raised venture capital. Dr. Gatewood has served as director of business centers providing consulting and training services to entrepreneurs. She has studied motivations, attributions, and other aspects of entrepreneurial behavior. Dr. Carter has significant experience studying nascent entrepreneurs and is considered an expert in database construction and statistical methods.

The Research

We began by asking reasonable people what explanations they could offer. (Almost everyone you ask can come up with one or more plausible reasons to explain why women entrepreneurs who lead promising businesses find it so difficult to grow those businesses. Most of these have to do with women’s inability to raise sufficient capital.) The answers were all some variation on one of these themes:

  • It’s the women.

  • They can’t, won’t, or don’t seek or win outside funding because they don’t aspire to high growth.
  • They’re not qualified or experienced.
  • They’re not a good business risk.
  • It’s the businesses.
  • Women choose small, locally focused businesses.
  • Women choose businesses in low-tech industries.
  • Their business concepts are not scalable.
  • It’s the networks (or rather the lack thereof) that women participate in.
  • Women aren’t in the right business circles to gain access to critical management and financing resources.
  • There are no women in key decision-making roles in the financing world.
  • It’s the venture capital industry.
  • The industry is male dominated.
  • The network is closed and the decision-making models are biased against women.

These answers represent widely held beliefs about why women entrepreneurs seeking to grow their businesses find it so difficult to get the resources necessary to do so. The answers are deeply rooted in personal theories of social capital, institutional behavior, and network theory.

We used these explanations (and the theories that they represented) to frame our investigation. We conducted research to determine what was and what was not true about the entrepreneurial process. We focused on high-growth enterprises and asked what hurdles exist for entrepreneurs seeking external capital to fund their growth. Next, we wanted to understand if some of these hurdles were unique to women. We also wanted to know—if the challenges were similar—was the bar somehow set higher for women? Only then could we understand the causes and the possible remedies for women’s apparent exclusion from the highest ranks of entrepreneurial success. Our body of work is referred to as the Diana Project (named after the Roman goddess of the hunt) because it focuses on women hunting for money.

The Research Methods

Together, the members of the Diana Project team have pursued several distinct but related research projects designed to explore the pathways to growth of women-owned businesses. We were particularly interested in the hurdles women encountered as they sought growth capital. We investigated the variety of oft-cited logical explanations for why women are largely unsuccessful in their hunt for venture capital money.

The research includes a detailed review of 300 articles included in the academic literature on women entrepreneurs and on venture capital to determine the state of current knowledge on the subject. The results of this research are compiled in Women Entrepreneurs, Their Ventures, and the Venture Capital Industry: An Annotated Bibliography (ESBRI, 2003).

Our research also includes a detailed analysis of all venture capital investments made in U.S. businesses between 1953 and 1998 to determine what proportion of the deals were made with women-led businesses. This was particularly challenging because industry data collection has not historically included any report of the sex of the founding team. Only a line-by-line review of the names of the officers in each firm receiving funding made it possible to make an educated estimate of the percentage of deals made with women entrepreneurs. (Because of the frequent use of initials only and the occasional use of unisex names, many deals had to be omitted from the tabulation. For example, from 1988 to 1998, the total sample included 8,298 investments, but in 48.1% of the companies, names could not be definitively classified by gender.)

The research next turned to the venture capital industry itself to determine the gender composition of the key decision makers in the industry. Pratt’s Guide to the Venture Capital Industry provided a comprehensive listing of all member venture capital firms and their members by title. The guide enabled identification of all female associates, principals, and directors or partners in the industry in 1995 and 2000. A comparison of the two selected years provided insight into the retention, promotion, and mobility of these women decision makers over the five-year period. The industry survey was complemented with personal interviews with a selected group of these key female venture capitalists to understand their perceived impact on their partnerships’ ability to attract and engage with women entrepreneurs.

Our next step included the identification and tracking of a select group of women entrepreneurs who were seeking growth capital in 2000. The women who submitted their business plans to Springboard Venture Forums in 2000 were ideal candidates. Although not all the plans were accepted for presentation at a Springboard event, the field of entries represented business concepts for which women were actively seeking venture funding. Follow-up phone surveys provided data on how their plans, businesses, and financing progressed from 2000 to 2002. This provided detailed information from the front lines of women entrepreneurs trying to raise growth capital.

The Findings

What was surprising in our investigation? We found that the hurdles that women must clear are just as real for men who choose entrepreneurship. Every single individual or team that decides to create a new venture must have the motivation and commitment to stick with the enterprise throughout years of challenges. Entrepreneurs must be technically capable and management savvy. They all need to build resources for the enterprise—often seeming to create something out of nothing. Successful entrepreneurs must start out with good ideas that are actually feasible and for which there is (or soon will be) a ready market. If their business concepts are not scalable, they will never be able to achieve high growth and high value status, although they might be able to successfully run smaller, local enterprises. We found that networks and the social capital to use them effectively made the process of building financial, human, and technological resources possible.

Women need all these skills and, yes, so do men. The differences we found were not in the skills required, nor in the organization-building processes. However, we found that the personal resources, the technical training, and the management experiences that women brought to their enterprises differed from their male counterparts’ resources—as did the attitudes and expectations about entrepreneurial success held by both women and society as a whole.

What to Expect in This Book

This book examines the entire entrepreneurial process—from concept development, basic business planning, strategic direction, and resource acquisition and deployment, to organizational growth. It looks specifically at those enterprises that have the potential to grow beyond $1 million in revenues—led by those entrepreneurs who envision large and highly profitable organizations. It explores the hurdles entrepreneurs face in growing a new venture, recognizing that growth is—first and foremost—a personal and strategic choice. It also recognizes that once the choice for growth is exercised, resources become a top priority. This book digs deepest into the issue of resource acquisition—particularly financial resources.

Not only does our book address specific resource hurdles that must be cleared to win the race for success, it also looks at how the race for success differs for women. It does the following:

  • Explores the roots and nature of misconceptions, stereotypes, and challenges women encounter in growing businesses.
  • Provides critical facts for female entrepreneurs who seek money and resources to launch and grow their entrepreneurial ventures.
  • Discusses the challenges encountered in building credibility and gaining access to the money, networks, and people needed to grow a young enterprise into a successful business operation.
  • Offers specific prescriptions for how women can succeed in growing a business relative to their personal goals and business type.
  • Provides information about various financing options and describes the venture capital process in detail.

Throughout the book, we offer specific recommendations and provide reference guides that can simplify the process of launching and growing a new venture. Our recommendations are clearly targeted at female entrepreneurs, but men will also find them useful.

Is This Book for You?

Yes, if you are in the process of creating, organizing, and growing a significant new venture. It is for everyone who aspires to join the elite list of superhero entrepreneurs. It is dedicated to those women who aspire to be the entrepreneurial heroines of the 21st century. We recognize that you must overcome all the same obstacles to success that your male colleagues face, but, in many cases, you will have to run a little faster, jump a tad higher, and, like Ginger Rogers dancing with Fred Astaire, do it while wearing high heels and moving backwards.

We started writing this book just for you—but please share it. The issues we uncovered in our research can inform men who want to take their entrepreneurial ventures to new heights. The guidelines offered here hold for all entrepreneurs—even for those who want to start new ventures of more modest proportions. Women and men who create enterprises to realize their personal dreams (without necessarily planning on changing the world) will find the book valuable.

When all is said and done, this is not a book for entrepreneurs only. It is also meant to spur those still in the managerial ranks (but dreaming the dream) into action. It can also inform providers of capital, goods, and services who benefit from the growth of entrepreneurial activity and wealth—accountants, consultants, customers, suppliers, and lawyers, to name but a few. In short, it is for everyone who wants to maximize opportunities.

Note

1. Center for Women’s Business Research. 2003. Key Facts about Women-Owned Businesses.



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Introduction

Why do we care so passionately about women and high-growth enterprises? Because entrepreneurship is a driving force in the growth and prosperity of the nation. Because entrepreneurs create innovative products, provide new jobs, and gain substantial financial rewards for themselves and their partners in the process. And especially because, for women, there is a significant gap between the number who start new ventures and the number who are able to achieve high growth and substantial success.
Entrepreneurs as Heroes...

You know their names today, even though they made their mark 100 years ago and more. Cornelius Vanderbilt (railroads), Andrew Carnegie (steel), John D. Rockefeller (oil), Marshall Field (retailing), and Henry Ford (automobiles) left an enduring legacy of innovation, market dominance, and vast fortunes. They are among a handful of extraordinary entrepreneurs who not only achieved great wealth, but also won international celebrity. Whether you think of them as robber barons or heroes, these men who developed railroads, steel, oil, large-scale retailing, and automobiles continue to have a star quality associated with their names more than a century later.

The creation of new ventures is deeply embedded in our American heritage. The exciting part is that it is even more vibrant and widespread today than it was in the days of Rockefeller, Field, and Ford. Ever-expanding technology, support from government policy and regulations, and the redefinition of corporate America in the 1980s and 1990s made the United States a hotbed of innovation and new venture creation. Entrepreneurs, armed with promising new business concepts, lured by vastnew market opportunities, and convinced of huge financial payoffs, launched millions of new ventures in the past 20 years. That they did so in an environment rich with resources—both public and private—added to the likelihood of their success. Some of the most celebrated contemporary venturers are Steve Jobs (Apple, Pixar), Bill Gates (Microsoft), Jeff Bezos (Amazon.com), Howard Shultz (Starbucks), and Michael Dell (Dell Computers).

In our hearts, we know that the kind of entrepreneurial success these men achieved is reserved for a very few. We sometimes think of them as the lucky ones, but we also recognize their focus, talents, and personal efforts. Looking only at their successes, it is easy to imagine that they hurdled over all obstacles in their race to develop new products and services, and then build new markets and industries. However, that was not really the case. Their successes were built on astute observation, practical application, and hard work. Each drew on personal resources, but when that wasn't sufficient, enlisted the help of others. Each one confronted failure more than once, but never accepted it as final.

Entrepreneurs starting new ventures today aspire to that same rarified air of success, but at the same time they recognize that these cultural icons are nothing short of heroic. The biggest winners among entrepreneurs are celebrities precisely because they are so unique in their accomplishments.

Why This Book?

Did you notice? The names on the preceding lists are all male. True, only a select few entrepreneurs become heroes—but it is also true that heroines are almost entirely absent from the list! With the notable exception of a handful of dynamos in the cosmetics (Madame C. J. Walker, Helena Rubinstein, Estee Lauder, Mary Kay Ash) and fashion industries (Coco Chanel, Liz Claiborne, Donna Karan), women have not been significant players in the world of high-stakes entrepreneurship. More recently, Carol Bartz (AutoDesk) and Meg Whitman (eBay) have become standouts in technology-based ventures.

We didn't set out to write a book. We simply wanted to find out why women, who in 2003 were majority owners of 28% of all businesses in the United States (and, if women with 50% ownership shares are counted, the total climbs to 46% of all privately owned businesses),1 were neither reaching the highest levels of entrepreneurial success nor achieving business celebrity in numbers proportionate to their start-up activity. What factors can explain this success gap for women entrepreneurs? One of the most obvious of the hurdles that women struggle with is the acquisition of key resources—particularly financial resources—so important to growth. For example, five years ago, in the heat of the venture capital rush to fund promising new enterprises, women entrepreneurs received less than 5% of the billions of dollars invested.

Why do we care about this? We are five professors who have spent our professional careers investigating the levers of success in entrepreneurial growth (Candida Brush, Boston University; Nancy Carter, University of St. Thomas; Elizabeth Gatewood, Indiana University; Patricia Greene, Babson College; and Myra Hart, Harvard Business School). In 1998, we decided to work together to investigate why women, who are definitely intent on climbing the ladder of entrepreneurial success, are having so much trouble getting to the top of it.

We agreed to turn our collective attention to the question of why there are so few heroines in the history of entrepreneurship. Even more important to us was the question of why contemporary women, who are starting new businesses in droves, are not highly visible among the ranks of the high-growth, high-potential entrepreneurs.

Each of us brings a different lens to the investigation. Dr. Greene is a sociologist whose work has included studies of entrepreneurship in minority communities. Dr. Brush has a long history of studying women entrepreneurs. Dr. Hart is an academic with practitioner roots. She has raised venture capital. Dr. Gatewood has served as director of business centers providing consulting and training services to entrepreneurs. She has studied motivations, attributions, and other aspects of entrepreneurial behavior. Dr. Carter has significant experience studying nascent entrepreneurs and is considered an expert in database construction and statistical methods.

The Research

We began by asking reasonable people what explanations they could offer. (Almost everyone you ask can come up with one or more plausible reasons to explain why women entrepreneurs who lead promising businesses find it so difficult to grow those businesses. Most of these have to do with women's inability to raise sufficient capital.) The answers were all some variation on one of these themes:

  • It's the women.
  • They can't, won't, or don't seek or win outside funding because they don't aspire to high growth.
  • They're not qualified or experienced.
  • They're not a good business risk.
  • It's the businesses.
  • Women choose small, locally focused businesses.
  • Women choose businesses in low-tech industries.
  • Their business concepts are not scalable.
  • It's the networks (or rather the lack thereof) that women participate in.
  • Women aren't in the right business circles to gain access to critical management and financing resources.
  • There are no women in key decision-making roles in the financing world.
  • It's the venture capital industry.
  • The industry is male dominated.
  • The network is closed and the decision-making models are biased against women.

These answers represent widely held beliefs about why women entrepreneurs seeking to grow their businesses find it so difficult to get the resources necessary to do so. The answers are deeply rooted in personal theories of social capital, institutional behavior, and network theory.

We used these explanations (and the theories that they represented) to frame our investigation. We conducted research to determine what was and what was not true about the entrepreneurial process. We focused on high-growth enterprises and asked what hurdles exist for entrepreneurs seeking external capital to fund their growth. Next, we wanted to understand if some of these hurdles were unique to women. We also wanted to know—if the challenges were similar—was the bar somehow set higher for women? Only then could we understand the causes and the possible remedies for women's apparent exclusion from the highest ranks of entrepreneurial success. Our body of work is referred to as the Diana Project (named after the Roman goddess of the hunt) because it focuses on women hunting for money.

The Research Methods

Together, the members of the Diana Project team have pursued several distinct but related research projects designed to explore the pathways to growth of women-owned businesses. We were particularly interested in the hurdles women encountered as they sought growth capital. We investigated the variety of oft-cited logical explanations for why women are largely unsuccessful in their hunt for venture capital money.

The research includes a detailed review of 300 articles included in the academic literature on women entrepreneurs and on venture capital to determine the state of current knowledge on the subject. The results of this research are compiled in Women Entrepreneurs, Their Ventures, and the Venture Capital Industry: An Annotated Bibliography (ESBRI, 2003).

Our research also includes a detailed analysis of all venture capital investments made in U.S. businesses between 1953 and 1998 to determine what proportion of the deals were made with women-led businesses. This was particularly challenging because industry data collection has not historically included any report of the sex of the founding team. Only a line-by-line review of the names of the officers in each firm receiving funding made it possible to make an educated estimate of the percentage of deals made with women entrepreneurs. (Because of the frequent use of initials only and the occasional use of unisex names, many deals had to be omitted from the tabulation. For example, from 1988 to 1998, the total sample included 8,298 investments, but in 48.1% of the companies, names could not be definitively classified by gender.)

The research next turned to the venture capital industry itself to determine the gender composition of the key decision makers in the industry. Pratt's Guide to the Venture Capital Industry provided a comprehensive listing of all member venture capital firms and their members by title. The guide enabled identification of all female associates, principals, and directors or partners in the industry in 1995 and 2000. A comparison of the two selected years provided insight into the retention, promotion, and mobility of these women decision makers over the five-year period. The industry survey was complemented with personal interviews with a selected group of these key female venture capitalists to understand their perceived impact on their partnerships' ability to attract and engage with women entrepreneurs.

Our next step included the identification and tracking of a select group of women entrepreneurs who were seeking growth capital in 2000. The women who submitted their business plans to Springboard Venture Forums in 2000 were ideal candidates. Although not all the plans were accepted for presentation at a Springboard event, the field of entries represented business concepts for which women were actively seeking venture funding. Follow-up phone surveys provided data on how their plans, businesses, and financing progressed from 2000 to 2002. This provided detailed information from the front lines of women entrepreneurs trying to raise growth capital.

The Findings

What was surprising in our investigation? We found that the hurdles that women must clear are just as real for men who choose entrepreneurship. Every single individual or team that decides to create a new venture must have the motivation and commitment to stick with the enterprise throughout years of challenges. Entrepreneurs must be technically capable and management savvy. They all need to build resources for the enterprise—often seeming to create something out of nothing. Successful entrepreneurs must start out with good ideas that are actually feasible and for which there is (or soon will be) a ready market. If their business concepts are not scalable, they will never be able to achieve high growth and high value status, although they might be able to successfully run smaller, local enterprises. We found that networks and the social capital to use them effectively made the process of building financial, human, and technological resources possible.

Women need all these skills and, yes, so do men. The differences we found were not in the skills required, nor in the organization-building processes. However, we found that the personal resources, the technical training, and the management experiences that women brought to their enterprises differed from their male counterparts' resources—as did the attitudes and expectations about entrepreneurial success held by both women and society as a whole.

What to Expect in This Book

This book examines the entire entrepreneurial process—from concept development, basic business planning, strategic direction, and resource acquisition and deployment, to organizational growth. It looks specifically at those enterprises that have the potential to grow beyond $1 million in revenues—led by those entrepreneurs who envision large and highly profitable organizations. It explores the hurdles entrepreneurs face in growing a new venture, recognizing that growth is—first and foremost—a personal and strategic choice. It also recognizes that once the choice for growth is exercised, resources become a top priority. This book digs deepest into the issue of resource acquisition—particularly financial resources.

Not only does our book address specific resource hurdles that must be cleared to win the race for success, it also looks at how the race for success differs for women. It does the following:

  • Explores the roots and nature of misconceptions, stereotypes, and challenges women encounter in growing businesses.
  • Provides critical facts for female entrepreneurs who seek money and resources to launch and grow their entrepreneurial ventures.
  • Discusses the challenges encountered in building credibility and gaining access to the money, networks, and people needed to grow a young enterprise into a successful business operation.
  • Offers specific prescriptions for how women can succeed in growing a business relative to their personal goals and business type.
  • Provides information about various financing options and describes the venture capital process in detail.

Throughout the book, we offer specific recommendations and provide reference guides that can simplify the process of launching and growing a new venture. Our recommendations are clearly targeted at female entrepreneurs, but men will also find them useful.

Is This Book for You?

Yes, if you are in the process of creating, organizing, and growing a significant new venture. It is for everyone who aspires to join the elite list of superhero entrepreneurs. It is dedicated to those women who aspire to be the entrepreneurial heroines of the 21st century. We recognize that you must overcome all the same obstacles to success that your male colleagues face, but, in many cases, you will have to run a little faster, jump a tad higher, and, like Ginger Rogers dancing with Fred Astaire, do it while wearing high heels and moving backwards.

We started writing this book just for you—but please share it. The issues we uncovered in our research can inform men who want to take their entrepreneurial ventures to new heights. The guidelines offered here hold for all entrepreneurs—even for those who want to start new ventures of more modest proportions. Women and men who create enterprises to realize their personal dreams (without necessarily planning on changing the world) will find the book valuable.

When all is said and done, this is not a book for entrepreneurs only. It is also meant to spur those still in the managerial ranks (but dreaming the dream) into action. It can also inform providers of capital, goods, and services who benefit from the growth of entrepreneurial activity and wealth—accountants, consultants, customers, suppliers, and lawyers, to name but a few. In short, it is for everyone who wants to maximize opportunities.

Note

1. Center for Women's Business Research. 2003. Key Facts about Women-Owned Businesses.



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