Breaking Into Business: Women Entrepreneurs

Diana, the mythical goddess of the hunt, is a symbol of womanly power and success.

Appropriately, School of Management professor Candida Brush and the four colleagues with whom she collaborated to study women business owners and entrepreneurs called their study “The Diana Project.”

Brush had been studying women entrepreneurs since 1981. Her research into the start-up and development of businesses run by women led her to the discovery of some staggering statistics.

In 1998, Brush discovered 3 percent of all venture capital funding went to woman-led firms and businesses. According to data collected from the National Venture Capital Association, the percentage went up to 6 percent in 2000.

Venture capital is a necessity for any entrepreneur. Sources of capital are institutional venture capital firms, which typically give between $3 million and 10 million, and “angel investors” — private investors who typically give between $25,000 and 2 million. Without this funding, it is difficult to launch a new company.

“The project started as we tried to figure out why is it such a small amount,” Brush said.

Brush and professors from the University of St. Thomas, Harvard University, Indiana University and the University of Missouri-Kansas City joined to investigate the phenomenon. The five women each approached the issue from a different angle, coming to the table with backgrounds in psychology, sociology, strategy and management.

The project began with an investigation of the industry itself. Investment statistics in the United States were re-coded to examine gender trends, Brush explained.

“We discovered that there wasn’t much out there — people hadn’t been looking at this issue,” Brush said.

After completing preliminary research, the study compiled a list of eight myths about women and equity capital that contribute to the difficulties women experience while trying to gain access to capital.

The study then promptly set about to discredit these myths.

“There were three major hypotheses that we were examining,” Brush said. One was that women simply lacked the qualifications — in education and experience — to make it in their own business, Brush said. Another was that women did not want to own high-growth business — that they were choosing not to pursue the money. A third option was that women were being left out of the “network.”

One by one, the study eliminated these and other related hypotheses by interviewing women through Springboard Enterprises, a forum for women entrepreneurs that holds conferences nationwide to connect woman-run businesses with investors, financiers and business development professionals. They found facts that directly conflicted with the premises of these myths.

“There weren’t differences in qualifications,” Brush said. “Women were going into these ventures with just as much knowledge as their male counterparts.”

Similarly, women held growth aspirations for their businesses that were just as high as men’s. According to the Diana Project, more than 80 percent of the Springboard applicants reported wanting to grow their ventures as rapidly as possible.

Networking, making social contacts and infiltrating the infrastructure of equity capital ventures, however, proved to be a point where women are still developing.

“When women start out, they create a business plan and go out to look for money. They are ‘chauffeured’ around — they don’t just immediately bring their plan to a big venture capital firm — and make a series of contacts,” Brush said.

As they meet with people, their plan is constantly being evaluated, improved upon and critiqued by potential investors. According to Brush, this is one of the hardest parts of the process.

“Women need to break into that infrastructure or develop their own,” she said.

If successful, Brush said, women can develop strong “social capital.” According to the Diana Project, “it’s not so much what you know as who you know. Social capital is essential in gaining access to opportunities and resources, saving time and tapping into sources of advice and moral support.”

To aid women in this process, organizations like the Center for Women and Enterprise were created. The non-profit organization has locations in Boston, Worcester and Providence and offers assistance to women starting businesses on small and large scales.

“Networking is the fabric of our organization,” said Providence director Carol Malysz. “It does make a big difference. We bring in accountants, insurance and professionals who are leaders in their fields and experts at marketing.”

Using these resources, women can make necessary connections. The Center for Women and Enterprise also provides financial services that help women who want to start their own business but are unsure about the procedure.

“Women don’t have as extensive a track record as men in accessing credit and funding,” explained financial services manager Kathy Goulding. According to Goulding, women often come in intimidated by the processes and paperwork.

“They have a dream to open a business but don’t know the right place to start; they’re not sure how to put the numbers together,” she said. “We help them set up a strategy and pull in consultants.”

Brush also advised preparation as a key element to obtaining funding. Getting feedback in advance, practicing good presentation skills and maintaining a polished appearance will contribute to overall attractiveness to the investor, she said.

“You have to not give them any reason to say no,” Brush said.

Malysz agreed, saying women need to take an active role in the process or risk not knowing what is going on.

“If they can’t answer the questions, that turns bankers off,” she said.

Now that the Diana Project is published, the research team is continuing its efforts. They have eliminated many wrong answers to the question of why women receive significantly less funding, but they haven’t arrived at the right answer yet.

Since the study established that gender factors should not be an issue while trying to obtain funding, the researchers are investigating whether women and men budget their money differently once they get it. This hypothesis could be another explanation of why venture capitalists are wary to give women money.

“Now, we’re comparing the strategies of women-led and men-led businesses to see whether there are differences once they get the money,” Brush said.

Malysz and Goulding reported that the number of women coming into their offices has been on a continuous upswing. Both foresee a positive trend in woman-run businesses.

According to Malysz, within the next few years, woman-run small businesses are expected to make up 50 percent of all small businesses in the United States.

“It’s going to take time for women to build up their resources and keep the trend moving in a positive direction,” she said. “It’s going to take a lot of work and a lot of time.”