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Women on short end of VC money are discovering new funding alternatives

By , - Last modified: September 5, 2018 at 10:12 AM

Last year was a good time to launch a startup, as more than $84 billion in venture capital was raised in the U.S. That total represents the highest amount since the dot-com era and more than twice the amount invested in the years following the market crash of 2008-2009, according to PitchBook, a financial data and software company.

At least it was good for men, as all-women teams captured just a slice, under $2 billion, of the VC harvest, according to a report in Fortune magazine.

VC funding isn’t the only way get capital, but some observers say women entrepreneurs in general find financing to be a challenge.

“The average credit score for women-owned businesses rose from 595 in 2016 to 598 in 2017,” according to a March study by Biz2Credit, an online credit marketplace.

Despite that, the survey of 27,000 companies, which ranked New Jersey as one of top five states for applications from woman-owned businesses, also found their average funded amount was $57,097, or 45 percent lower than the $103,604 average obtained by male-owned businesses.

Making a difference

Some organizations like Grameen America — a nonprofit microfinance organization that said it’s disbursed more than $820 million dollars in small loans to low-income women during the last decade — are trying to do something about that discrepancy. The organization’s Newark office, for example, has channeled more than $100,900 in microloans to 100 women entrepreneurs since November 2016. But efforts like that are still the exception.

Part of the reason is structural, according to Katherine O’Neill, executive director and investor with JumpStart New Jersey Angel Network, an investor group that targets early stage, high-growth companies in the mid-Atlantic region.

NJAN doesn’t specifically target women-led ventures, “we look for high-growth opportunities,” she said, while allowing that “we do see lot of women entrepreneurs” in the biotech segment in New Jersey, Philadelphia and New York City.

“Statistics show that many VCs are not gender-blind,” added O’Neill, who’s also a board member of the national Angel Capital Association. “As more women become investors and as more become partners in large VC funds, it’s likely that more funding will go to women-led businesses.”

Or they may just set up their own, like The Helm, which was launched a few years ago by Erin Shipley, a former investor in a Los Angeles-based VC fund.

“Our fund invests in early stage, high-growth technology companies with women at the helm,” announced the organization. “We invest in eight to 12 deals per year primarily at the seed stage, and provide strategic support to our founders to help their companies grow. Our fund invests in female-founded companies with female CEOs. We’re putting resources behind the woman who are in the technology and innovation sector, at the helm of companies that will change our culture.”

Not ready for primetime

Sometimes, though, a woman-owned company just isn’t ready for VC or other financing. That’s what Paula Muller found when she tried to shop her company around. “In 2015, I had a self-funded soft launch of Sociavi,” she said, referring to the dedicated mobile-device service she developed that uses free apps to help seniors stay in touch with their families.

Muller, the founder and CEO, described it as offering Facebook-like social media capabilities — where family members and others in a network can send videos, photos and alerts for daily activities and appointments — but simpler to use, without the logins and swipes that seniors may not want to master.

Muller has a Master of Science in biomedical engineering from a university in her native Chile, and a Ph.D. in biomedical engineering from Rutgers University, where she also did postdoctorate work at its neuroelectric laboratory. Muller came to the U.S. about 20 years ago, and worked as a lead engineer at a telehealth company before going out on her own.

“In April, under the New Jersey [Economic Development Authority] Founders & Funders program, I met with some investors, but they said my company was still in the pre-investment stage,” she said. “They said I need to collect data and establish a track record. I’m planning on looking for angel investor funding again in 2019.”

Last year Muller and her company won the local InnovateHER Challenge sponsored by the New Jersey Small Business Development Centers network at Brookdale Community College. It is part of a national SBA competition “for entrepreneurs who are developing products and services that will enhance the lives of women and their families,” according to the agency. The top three national finalists competed to win $40,000, $20,000 and $10,000, respectively.

“I didn’t get any money at the local level, but I got valuable experience from presenting my business plan and product in a face-to face meeting with the panelists,” she recalled. “It was a positive experience that also came with recognition, publicity and feedback from the panelists.”

No one argues that funding isn’t important, but it’s not everything; sometimes an entrepreneur has to chug along and build up experience and contacts before going for the gold. Fortunately, New Jersey has stepped up to the plate in that regard. In addition to working with the NJEDA and NJSBDC, Muller also connected with a program run by the New Jersey Innovation Institute — a New Jersey Institute of Technology corporation — called Health IT Connections.

Designed to link health IT innovators with health care executives, providers and consumers in and around Newark, “they helped me with guidance for the business in many aspects: positioning, branding, value-proposition, financing and overall organization of the business,” according to Muller. “Also, I made very good connections that I can count on for anything that I may need for the business, and vice-versa. I’m a resource for these connections, and we support each other.”

The NJSBDC at Brookdale Community College also has an annual program event entitled Women Entrepreneurs Rock that brings together women business owners — including at startups and other different stages — to “hear from business experts on an array of business issues so they can navigate the challenges of running a business,” said Deborah Smarth, NJSBDC chief operating officer and associate state director. “Our NJSBDC network headquarters office also sponsors a special Women Warriors in Business symposium to learn about business leadership skills and women business empowerment.”

Kim Osterhoudt, owner and CEO of an artisanal food company called Jams by Kim — which a few years ago was selected by the NY/NJ Super Bowl Host Committee for inclusion in the NFL team owners’ swag baskets — has also benefited from making personal connections. Besides being active in the New Jersey Association of Women Business Owners, Osterhoudt previously was accepted into the Entrepreneurship Pioneers Initiative at Rutgers Business School-Newark.

“It was a tremendous experience with a peer group,” she said. “The initiative involved networking, coaching, counseling and advice.” Through NAWBO, she’s also a member of a ”mastermind” group and gets together once a month with other business owners to talk about challenges and exchange advice.

NAWBO-NJ President Connie Pizarro — who owns an Oasis Senior Advisors Central Jersey franchise — also praised the Entrepreneurship Pioneers Initiative. “I attended the EPI program at Rutgers-Newark,” she said. “It helps participants to develop a three-year business program, and I also learned about the importance of understanding numbers. It helps business owners to make informed decisions based on documentation instead of just a gut feeling. You can take what you had in your head and put it down on paper and make it a reality.”

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