A Start-Up of Her Own
Meet the new generation of American CEOs: They're young, wired, fearless--and female
It is not your usual girls' night out. By 6 p.m., when most employees have already fled a corporate steel-and-glass low-rise in Redwood Shores, Calif., a dozen women are just drifting into a borrowed second-floor boardroom for their semimonthly get-together. Sporting everything from tailored power suits to jeans, they pick up Styrofoam cartons of Chinese takeout and settle around the oval conference table to catch up on each other's news. Marianne van Gelder, a single mother and recent law school graduate, can hardly wait to report her latest coup. "This week was just awesome," she enthuses. "Tomorrow I see my $10 million guy."
In another era--say, even five whole years ago--her audience might have concluded that van Gelder had just landed a hot date with a sugar daddy. But in this room, when the subject turns to courtship, the women mean their own wooing of "VCs"--which, for the uninitiated, means venture capitalists, not Viet Cong. For van Gelder, who heads her own E-commerce start-up, AnWang Enterprises, the next day's rendezvous is her chance to pitch one of Silicon Valley's leading firms for $10 million in second-round funding. Listening to that news, the boardroom breaks out in the kind of admiring oohs and applause once reserved for a debutante showing off a high-watt diamond. Welcome to girl talk in the new millennium, where budding female entrepreneurs would rather chat about boosting the bottom line of their businesses than updating their hairstyles. For these aspiring tycoons, dishing the dirt means getting the lowdown from that night's guest CEO on when to demand a nondisclosure agreement. The evening is the fourth in a six-part training series sponsored by the San Mateo, Calif.-based Forum for Women Entrepreneurs, one of a handful of organizations that have banded together in an effort to put more women into the driver's seat of the "new economy." Although the movement so far is small, its aims are by no means modest. "We didn't want women to be doing nail salons," says Denise Brosseau, the forum's executive director. "We wanted them to be thinking about joining the Fortune 500."
Across the country, Brosseau and a group of private foundations--some funded by the first generation of Silicon Valley's female millionaires--are tackling one of the last frontiers of the women's movement: boosting a new generation of female entrepreneurs into the country's loftiest economic circles. In doing so, they are accelerating a trend that has already begun to change the face of American business. During the past decade, women have been starting their own companies at nearly twice the national average and now own 38 percent of all U.S. firms. Since 1987, the number of female-owned ventures has doubled from 4.5 million to 9.1 million, according to the National Foundation for Women Business Owners (NFWBO).
No longer sidelines. Once, the majority of those businesses were dismissed as minor-league operations. But over the past three years, their staff and revenues have skyrocketed. By 1999, female-owned companies employed more than 27 million Americans--nearly 9 million more than in 1996--and their annual sales had risen from $2.3 trillion to $3.6 trillion. "Quite clearly, these aren't women who just want to stay home and start a little something on the side," says NFWBO Executive Director Sharon Hadary. "Their businesses are getting bigger and more substantial."
That shift in scale is largely the result of an influx of female CEOs of the Internet generation. Young, tech-smart, and armed with both impressive credentials and chutzpah, they aren't content to work their way up through the corporate ranks and await the keys to the executive suite. After all, despite the hoopla capping Carly Fiorina's appointment as CEO of Hewlett-Packard last year, she remains one of only three women heading a Fortune 500 corporation.
Instead, women are hitching their fortunes to the entrepreneurial zeitgeist in the air, writing their own business plans and appointing themselves president, CEO, and chairwoman of the board. "The new generation of women entrepreneurs that I see have not even tested the corporate waters," says Myra Hart, a professor of entrepreneurship at Harvard Business School. "They're going straight out on their own. The economic environment is better for women than it ever has been."
One reason is the emergence of the Internet economy. Originally, the high-tech revolution centered on semiconductor makers and hardware know-how, a traditional male stronghold. But five years ago, the commercialization of the Internet brought a demand for marketing savvy and consumer service--fields in which women have long flourished. "Now you can take a retail idea, put it on top of the Internet, and build a huge business," says Hart. "For the first time, really big deals were open to women."
These days the media regularly offer up inspirational images of those self-made moguls: Meg Whitman building eBay into a multimillion-dollar online flea market and Martha Stewart wowing Wall Street with her artfully crafted stock offering, served up along with cocktails and canapes. As Hart points out, "The role models for entrepreneurs have become almost as popular as basketball stars."
Even for a 29-year-old techno-wizard like Krishna Subramanian, who holds a master's degree in computer science and five patents from Sun Microsystems' labs, those celebrity role models have proved oddly reassuring. Last year, when she left Sun to co-found Kovair, a San Jose-based Web platform for managing E-business clients, she found comfort in the notion that other unlikely women had transformed themselves into new-economy deal makers. "When you see more women running big companies, it seems more doable," she says. "And it's changed other people's perception of whether women can do the job."
In a sleek loft development in San Francisco's trendy South of Market district--known here as start-up central--one sculpture strikes a strangely plaintive note. Over a fireplace, a foot-high pink papier-mache dress, complete with prim pleated skirt, sports a caption reading, "I Hope He Calls Me Tomorrow." That tribute to decades of helpless feminine longing stands in ironic counterpoint to the can-do determination of the dozen resident entrepreneurs currently ensconced in the Women's Technology Cluster.
High-tech incubator. Founded last year by Catherine Muther, 52, a former vice president of marketing at Cisco Systems, the cluster is a monument to mentoring: the first high-tech incubator focused exclusively on fostering female-run firms. Initially financed by Muther's Three Guineas Fund--a private foundation named after a Virginia Woolf essay--it provides loft space, advice, and expert round tables for 10 to 13 burgeoning businesses at any given time.
Muther's theory was that the incubator's sense of community and its visiting cast of experts could make up for the financial networks that most women entrepreneurs lack as they set out to join the dot-com gold rush. "We're interested in Internet companies because that's where the new wealth is being created," says Margarita Quihuis, the cluster's 38-year-old director. "And our mission is to make sure women get their share."
Until now, their pickings have been slim. In a survey of 100 Internet-related companies released last month, Spencer Stuart, an executive search firm, found only 3 percent of them had female directors. By contrast, 84 percent of Fortune 500 companies boasted at least one woman on their boards.
With an eye to changing the dynamic, she and Muther screen every applicant in a grueling good cop-bad cop interview routine. "We see how they respond to pressure," Quihuis says. "If they go in front of a venture capitalist, they're going to get hammered." One team's business plan looked promising on paper. "But they came in and they immediately cratered," she recalls. "You could tell from the body language and the slumped shoulders that they didn't have what it takes."
Once CEOs pass muster, they can stay at the cluster until their companies grow beyond an informal 30-employee limit. Then, as Quihuis puts it, "We kick them out of the nest." Already, four of the cluster's firms have graduated in the past six months. And scheduled for the boot by September is LevelEdge.com, the brainchild of 38-year-old Lisa Henderson. A spiky-haired blond who grew up poor but athletic, Henderson got into Missouri's Lindenwood University through a fluke. Watching a college soccer game when she was a high school senior, she was asked to sub for an absent player. She scored two goals, landing herself an athletic scholarship. After graduation and six years in marketing at Ralston Purina, Henderson realized the Internet could offer other young athletes the future she once kicked open for herself. At lunch with Muther last fall, she plotted out her dream on a paper napkin: a database that would democratize college recruiting by tracking the performance of America's 10 million high school athletes. "I thought technology could be the great equalizer to get kids noticed," she says.
In April, she launched LevelEdge.com at the National Collegiate Athletic Association finals, and 3,000 coaches signed up. That same week, she wrapped up $4 million in first-round financing from investors, including Goldman Sachs and former tennis star Billie Jean King. But for Henderson, the most moving vote of confidence came in a personal check from one of her former bosses, Carol Bartz, CEO of San Raphael-based Autodesk. "I got two slides into my presentation," Henderson recalls, "and she said, `I love it. I know you have the drive to succeed. Let me introduce you to whoever I can.' "
That sort of mentoring is precisely what Muther hopes to encourage as she rolls out plans for a series of similar Women's Technology Clusters in high-tech hubs from Seattle and Austin to the suburbs of Washington, D.C., over the next two years. But she has not left that philanthropic impulse entirely to chance. The price for enlisting in her incubator is to hand over 2 percent of each company's worth. For Muther, the point is not to build a fat stock portfolio but to ensure that the cycle of philanthropy carries on. "It's not enough to make money," Quihuis says. "You have to give back."
In the conference room at Oracle Corp.'s headquarters in Redwood Shores last January, Kim Fisher had no time to savor her status as a pioneer. Only minutes before the 31-year-old CEO of AudioBasket was scheduled to make her pitch at Springboard 2000--a landmark venture-capital fair focused exclusively on women-run firms--Fisher realized she couldn't carry all her props on stage. With her arms already full of magazines and newspapers intended to illustrate the information overload her customized audio-news service would supplant, she had no way to illustrate its range of unique delivery, from cellphone to Palm III. Then she hit upon the notion of clipping those devices to her belt. Fisher was well into her 17-minute pitch when she saw she was winning the attention of the 225 assembled venture capitalists in a way she had not intended. "I started unbuttoning my jacket," she says, "and people thought I was doing a striptease."
Despite that blip, Fisher was among the stars of Springboard 2000. Co-sponsored by the Forum for Women Entrepreneurs and the Washington-based National Women's Business Council, the all-day event was designed to smash the single biggest barrier for women entrepreneurs in the new economy: their access to the megabucks of venture capital. To some like Deborah Naybor, who runs a land-surveying company outside Buffalo, the problem was a familiar story. A decade ago, she faced banks wary of granting women small-business loans. One gave her 30 days to pay back $70,000.
Now, banks have come around, but women are getting short shrift from venture capitalists. As a recent study led by Candida Brush of Boston University showed, out of the total venture funds invested last year--an estimated $20 billion--only 4 percent went to women.
"The venture world is probably the ultimate old-boys network," acknowledges Jay Hoag, the managing partner of Technology Crossover Ventures, based in Palo Alto, Calif. "Until a few years ago, you'd go to a venture capital event, and it was all guys." Over the past five years, more firms like his have welcomed female partners, with a predictable result. This spring, Hoag was surprised to learn that eight of the 40 companies his fund had backed were headed by women.
But in a field that boasts 2,375 men, the arrival of an estimated 100 women partners meant that less than 4 percent of the community was female. "There's still a lot of venture firms that are strictly male," says Susan Mason, one of three female partners at Onset Ventures in Menlo Park, Calif. "And they're proud of it."
Five years ago, Sona Wang, a Chicago venture capitalist, co-founded the first woman-focused fund, Inroads Capital Partners in Evanston, Ill., which targeted companies in technology and health care. "We're in a time when the constant challenge is to find more attractive projects," she says. "Yet there was this whole other market not being tapped." Since then, a half dozen other women's venture firms have emerged. But they still represent a tiny fraction of the entire venture-capital industry.
Wang and others knew more-radical measures were needed. One problem was the insider nature of the venture community, which operates on a complex web of personal ties. "A typical venture firm gets 5,000 business plans a year," explains Quihuis. "So they have this triage: never accept a proposal over the transom. You have to come in pre-screened--through an attorney, an accountant, or someone in their circle. Women have not had access to those networks, nor did they understand that's how it worked."
Muther proposed demystifying the process with the first-ever women's venture fair, patterned after celebrated high-testosterone events run every year in Silicon Valley by Red Herring magazine and Garage.com. Her Three Guineas Fund seeded the project, which cost an estimated $500,000. Issuing an appeal for promising business plans from women CEOs over the Internet, Springboard's organizers were swamped with over 300. They whittled that list down to 27--among them Fisher's AudioBasket. Each was promised 17 minutes to make her case to 225 leading venture capitalists. To make sure those 27 were up to par, the organizers hired Kim Marinucci, whose Winning Pitch specialized in honing venture presentations. "There's a style thing--physical presence, how to stand," Quihuis explains. "When women get nervous, we get the Minnie Mouse voice."
Three months later, 26 of the 27 Springboard presenters have received funding worth an estimated $100 million, plus strategic partnerships. "They were fighting off investors," says Amy Millman of the National Women's Business Council.
So successful was Springboard 2000 that follow-up events are already scheduled across the country over the next six months, beginning in Washington, D.C., next fall. And last month, a New York version, billed as "The Women of Silicon Alley Summit," showcased 21 female entrepreneurs--including Pamela Kleier, CEO of c-z.com, a Kentucky-based Web site featuring construction materials. For Kleier, the event helped counter the discrimination she felt from venture capitalists-- not as a woman, but as a Southerner. "There's a geographic bias in the dot-com world," she says. "If it doesn't happen on the West Coast, it's probably not a valid concept."
Still, in the wake of the high-tech market meltdown in recent weeks, some women worry that, at the very moment they are finally landing invitations to the inner sanctums of venture capital, the party is winding down. "It will become more competitive to get that cash," concedes venture capitalist Mason. "The numbers will go down--but not just for women."
Quihuis argues that the new climate may, in fact, play in women's favor. "There was a good deal of get-rich-quick going on," she says. "But women are very conservative. They want to build something real." Fisher, who earned her M.B.A. from Berkeley in 1994, agrees. "People are going to be more selective about where they put their money," she says, "and I kind of like that. Having gone to business school before all this happened, I kind of thought [profitability] was supposed to be your goal. "
Eight months ago, Menekse Gencer looked around her Los Angeles office and found she didn't care for the long-term view. Barely a year after earning her M.B.A. from Pennsylvania's Wharton School of Business, she had landed a consulting job at PricewaterhouseCoopers. Although she had no complaint about her assignments or six-figure salary, she recoiled from the women she saw in upper management. "Frankly, they just seemed miserable," she recalls. "I said to myself, `I don't want that to be me.' "
In October, Gencer resigned to join two former Wharton classmates as a co-founder of Vistify, a deco-styled Internet appliance intended to simplify household E-commerce. As her example shows, the flip side of women's mass migration to entrepreneurship is their mass exodus from corporate America. For some consulting firms like Deloitte & Touche--where women were once leaving at twice the rate of men--that exodus became so critical that it prompted a radical rewrite of promotion and family-leave policies. And in the tightest labor market in postwar memory, it has added to the thorny task of recruiting women for top management. "There's a huge shortage of talent," says Jeffrey Christian, the Cleveland-based headhunter who found Fiorina for Hewlett-Packard. "There aren't enough good women to go around."
The National Foundation for Women Business Owners reports that women are decamping from corporations out of growing frustration over their treatment. But Gencer, at 28, doesn't share that complaint. For her and others, the tales of thwarted ambition told by older women entrepreneurs seem alien and exotic--a symptom of a yawning generational divide. "Today, young women are much more confident, not only in their own abilities," says Hart, "but about their place in the business world."
There are also more women with M.B.A.'s and high-tech degrees. In 1997, 34 years after the first woman graduated from Harvard Business School, women earned 39 percent of all graduate business and management degrees. JoMei Chang, 47, the CEO of Vitria Technology--a $5 billion company specializing in applications integration software--has watched the ranks of women in high tech grow as well. In 1984, when she arrived at a small Silicon Valley start-up called Sun Microsystems with a Ph.D. in database management from Purdue, she found herself the only female engineer on a 20-person team. By last year, when she was asked back to speak, her hosts couldn't tell her how much those ranks had swelled. "There were so many, they couldn't count." In her own case, she says, "I never let the fact of my gender or race become an issue."
Today, the greatest challenge to women entrepreneurs--after finding capital--is as old as biology itself: the difficulty of juggling both a fledgling company and a fledgling family. Heather Blease, 37, who founded EnvisioNet (which provides technical support for the Microsoft Network) in Brunswick, Maine, five years ago, can speak to those conflicting tugs. At a time when her company was exploding from three to 1,500 employees, she was changing diapers for three toddlers under 6. Leaving for one pivotal fundraising trip to the West Coast, she was kissing her second son goodbye when he demanded, "Mommy, do you love your company more than me?" She got over that moment--"You just have to," she says--and has gone on to build Maine's fastest-growing company.
But no female entrepreneurs pretend that such warring demands are without a price. "It's not easy," says Sandra Kurtzig, the 51-year-old founder of the Ask Group, a manufacturing software system that was once the country's second-largest woman-led firm. Kurtzig recalls her mother phoning to scream at her, "How can you fly off when your son has measles?" And she admits her work played no small part in her divorce. Still, she now urges young women M.B.A. students to "Go for it. Just be willing to take the same amount of risks as men."
In fact, she offers the prospect of a future payoff. At a time when some women are grappling with empty-nest syndrome, her oldest son has just asked her to join him as a partner in a start-up. "Now my kids need me in a different way," she says. "And the more mothers that are working, the better effect it will have on their sons' hiring women in business."
Two years ago, a pair of female students at Harvard Business School asked Hart, one of the four co-founders of the Staples office empire, to add a course on entrepreneurship for women to the curriculum. "They saw entrepreneurship as a career choice that was much more compatible with raising children than corporate life," she recalls. But after hearing horror stories from some of the country's top women CEOs, many revised their opinion. Now, Hart says, unlike earlier generations, they look at starting their own businesses as "one among a number of career choices. There's a feeling you can have it all--and you don't have to do it all at once, or at the same time."
At the Women's Technology Cluster, Meneske Gencer shares that view. As a single woman without children, like most of the new generation of female entrepreneurs, she hasn't yet had to figure out how she'll juggle family and her start-up, but she's confident she will. "Today, you think, `Thank God, women don't have to be one thing or another--a businesswoman or a mother,' " she says. "If women are the CEOs, they can make it OK to be both." Sharon Hadary of the National Foundation for Women Business Owners agrees. "The rules for business are being rewritten even as we speak," she says. "And what's become clear now is that women will have a role in rewriting them." GRAPHIC Picture |s THOMAS BROENING FOR USN&WR |c Kim Fisher, CEO of AudioBasket, calls herself a "born entrepreneur." As a child, she sold hand-decorated lunch bags at school. After getting her M.B.A., she helped set up an Internet portal in Lithuania.
This story appears in the May 15, 2000 print edition of U.S. News & World Report.