Veena Gundavelli is a rarity these days. She’s CEO of Emagia Corp., a Santa Clara startup, which just obtained $7.5 million in venture capital funding.
“Obviously the times are extremely tough,” Ms. Gundavelli says. “It’s hard for [startups] to get noticed and taken seriously. Unless you’re a very seasoned entrepreneur and have a very clear value proposition, you’re not getting funding.”
In 2000, venture-backed companies with women CEOs received 5.3 percent of about $94.4 billion in venture capital, according to Alternative Investor, an umbrella data and analysis organization of San Francisco-based VentureOne Corp. and Wellesley, Mass.-based Asset Alternatives. The group tabulates venture capital deals with women-led companies every six months.
In data released in April, Alternative Investor also reports that VC-backed companies with at least one woman in senior management received 40.72 percent of the total venture funds. But all those numbers dropped in 2001 and again in 2002, according to the data, when venture-backed companies with women CEOs received 4.49 percent of just $20 billion venture capital, and VC-backed companies with women in senior management received 32.91 percent of the pot.
“They’re getting a smaller share of a smaller pool,” says Tamar Zemel, senior communications manager at Alternative Investor.
For entrepreneur Cynthia Typaldos, “middle-aged women like me aren’t taken seriously when it comes to having real vision and vision in technology.” The founder of two Internet startups that have since sold, Ms. Typaldos is currently looking for angel funding for a third, Software Product Marketing eGroup. She says she doesn’t see VCs as inherently gender discriminating, just that in this economic climate, “they’re going back to the old boys’ network because they’re not taking any risks at all. It’s almost like they can’t imagine that I might be talking about something visionary and really big.”
If the declining numbers continue, the trend could have a significant impact on the pool of women who go on to become venture capitalists. While there are some women venture capitalists in Silicon Valley, there aren’t many. Heading up a company is often a stepping stone to investing in startups.
“I think we’ve taken a big step back,” says Kimberlie Cerrone, managing member of The Angels’ Forum, an early-stage investment group of private equity investors and a financial services management team dedicated to Silicon Valley startups.
“For those of us who were lucky enough to get the experience, we’re doing OK. It would be an evidence of our success if we had more women VCs or more women in prominent roles in the law firms or the banks.”
Many women entrepreneurs say, however, that getting venture funding may be more about who you know than about what you are.
“It would be nice to have more women, but it really doesn’t make that much difference to me if I’m calling a man or a woman for that investment,” Ms. Cerrone says. “What matters is if I have a relationship with them. Are they going to be interested in what I have to say?”
Vocera Communications CEO Julie Shimer helped secure $12 million in its third round of funding last year, just seven months after her appointment to the company’s top post. A valley outsider with a corporate background and no startup experience, she had strong business credentials as a former Motorola executive and 3Com Corp. president and general manager. But she credits the connections her management team had with the VC community with helping get attention. “It’s who you get introduced to,” she says.
“By and large it’s a fairly male-dominated industry where who you know, your background and your reputation are very important in getting those introductions,” says Susan Hailey, CEO of the Bay Area chapter of the Forum for Women Entrepreneurs. “If you are a woman with all the right credentials and you happen to know all the people in the community, you’re going to have an easier time.”
Ms. Cerrone says women are being hurt more than men by the downturn.
“There are relatively very few of us in the valley that can pick up the phone and send an e-mail to Bob or Joe at a VC firm and get a call back,” she says. “Our networks simply don’t compete with the networks that are available to men.”
Although data from Alternative Investor show a short-term drop-off in women heading startups, there’s no finding as to whether women have opted out of the high-risk environment for personal reasons, socioeconomic factors — or if they’ve been excluded by discrimination. The issue needs further study to prove a significant decline, Ms. Zemel says.
Meanwhile, women are making moderate gains in the community of non-venture capital-backed enterprises, according to the Center for Women’s Business Research in Washington, D.C.
There were 6.5 percent more women-owned firms in San Jose in 2002 than there were in 1997, according to the CWBR. There were 34,897 women-owned companies in San Jose in 1997, which grew to 37,150 in 2002, CWBR says. About 28 percent of the city’s women-owned business are privately held, according to CWBR.
Statewide figures showed a similar picture. Women owned about 29 percent of all privately held firms in California, or 745,749, accounting for about 29 percent of privately held firms in the state, according to CWBR. The number grew about 7 percent between 1997 and 2002, CWBR says.
JENNIFER PITTMAN is a freelance writer based in Santa Cruz.
This article is published here.