Women Business Owners in Equity Capital Markets

Eqity investors and women entrepreneurs are beginning to discover each other, according to a new study by the National Foundation for Women Business Owners (NFWBO) and Wells Fargo & Company.

According to the study, titled "Women Entrepreneurs in the Equity Capital Markets: The New Frontier,"

In addition to more women entrepreneurs reporting that they are seeking equity investment, the study found that 44 percent of the investors surveyed said that they have seen a marked increase in the number of investment proposals from companies owned by women.

Bruce Rosenthal, a spokesman for NFWBO, says that many of the companies seeking capital need significantly more money than they could generate in conventional debt financing in order to jump to the next stage of growth.

Still, however, the study reveals that women's participating in the equity markets is minuscule when measured against the role and scope of women-owned businesses in the economy, according to Rosenthal. According to the report on findings, only nine percent of institutional investment deals and 2.3 percent of institutional dollars went to woman-owned firms in 1999. Rosenthal reports that 38 percent of all U.S. businesses are owned by women and one in. four American workers is employed by woman-owned firms.

Nina McLemore, NFWBO chair and president of Regent Capital, an equity investment firm, says, "The NFWBO report should serve as a wake-up call to accelerate the involvement of women entrepreneurs in the equity-capital markets. Women entrepreneurs should consider seeking equity investment, and equity investors should recognize the market potential of these increasingly substantial women-owned firms."

Both the women business owners and the institutional investors interviewed for the survey agree that building an effective network of business advisers is a key factor in winning equity investment. The network should include accountants, attorneys, fellow business owners, and others who can help the entrepreneurs build an effective business plan and who can refer the owners to appropriate sources of both capital and expertise.

Institutional investors reported that two-thirds of the proposals they seriously considered came from referral networks.

Other key factors in succeeding in the equity markets include:

* Giving up management control. Nearly three-quarters (73 percent) of women who have equity capital were prepared to give up day-today control of their businesses, compared to only 58 percent who were still seeking equity investment.

* Strong management team. The management experience of the company's leaders and their understanding of the market were critical in the investors' evaluation.

* Demonstrating marketing knowledge. Presentations need to feature a clear business concept and a realistic marketing plan.

* Persistence. Women who won equity investment reported that they contacted an average of 15 funding entities before they succeeded.

Despite the reported interest among institutional investors, the bulk of the equity investment in woman-owned businesses currently comes from informal or individual investors. The survey found that 73 percent of the firms with equity capital received that backing from individual or "angel" investors. Only 15 percent say they received funds from venture-capital firms.

NFWBO's Rosenthal also reported that the growing success of women -owned firms in the equity markets stems from the fact that more women are entering industries more attractive to investors-industries such as computer software, networking, and finance.

McLemore adds that more women are moving into decision-making positions in investor firms, and that is benefiting the women business owners. Two-thirds of women investors reported making an, investment in women-owned firms in the past three years, compared to 40 percent of men investors.