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Onderzoek O+ over female entrepreneurs and venture capital geplaatst op thenextwomen.com (deel II)

25 March, 2009 (12:56) | | By: marieke

During the recent years two remarkable trends have occurred in the economic sector: a growth of small entrepreneurs worldwide and an increasing number of women that have started their own business. Women’s share of business ownership is growing. Numerous researchers were triggered to investigate the issue of gender and entrepreneurship.

Marieke de Kort, founder of the Dutch on-line community for businesswomen O+ zakenvrouw van nu, has looked into this trend and is interviewed by The NextWomen about her findings. Part I is about the importance of venture capital for businesses. In part II Marieke identifies the informal venture capital issues that women led businesses face.

What kind of research has been done about venture capital for female businesses?

Major studies conducted in the past have contained discussions about the cause of the increased number of female entrepreneurs, whereas others were primarily focused on researching the differences between female and male entrepreneurs. More recent studies have put more emphasis on the general issues of management in female owned business, in particular with regard to the differences in access to financial resources for female entrepreneurs (note 1). These studies have shown that one of the main issues facing women setting up business has been raising finance for their startups. It turns out women obtain one-third of the funding that men secure when starting up their business (note 2).

These women obtain less financing such as bank loans, but they also acquire less informal venture capital (Note 3).

What could be the reason for this?

Some economic specialists argue that female entrepreneurs are not interested in venture capital because they do not aspire to expand their company. Others state that women are interested in the capital but are not acquainted with the procedures to get access to these financial resources. As will be discussed later, this may be caused by a lack of network or by gender issues.

Because women are important contributors to our economy and since in many occasions venture capital enables an entrepreneur to move its business to a higher level, it is important that women do get the necessary finance.

Are women attracted to money?

Although it may seem odd at first sight, some researchers believe that the differences between men and women acquiring venture capital is caused by a lack of interest of women in financial resources. However, this may be explained first of all by the fact that the start-up size of businesses run by women is smaller than that of men. A notable finding in research is that female entrepreneurs often start in business sectors with low capital requirements such as the service sector (Note 4). Second, women are believed to make more use of their own resources, with the exception of money borrowed from family and friends, and less of debt financing such as informal venture capital (Note 5). Therefore, less informal venture capital needs to be acquired from informal investors, which may lead to the fact that women are less interested in informal venture capital than men.

Other researchers conclude that female and male entrepreneurs do not differ with respect to the amount of their own resources used (Note 6). Although women are seemingly interested, results from Becker-Blease & Sohl suggest that the pattern of financing for women-owned businesses in the venture capital industry, where women receive only a small fraction of overall investment finance, is repeated in the informal investment market. This pattern is indicative of the low rate with which women seek financing from informal investors. Conclusively, it is widely held that female entrepreneurs are seeking investment by informal venture capitalist, (Note 7) although data to substantiate this viewpoint is sometimes lacking.

Is there a ‘gender’ issue while obtaining venture capital?

Assuming that female entrepreneurs are actively acquiring venture capital, based on previously mentioned examples, the question remains why women do not obtain as much venture capital as their male counterparts. There are two main opinions about this fact. The first presupposes that there is some sort of gender issue involved. Researchers also concluded that the difference in seek rates appears, at least in part, to be driven by “homosexuality” on the part of entrepreneurs in the informal investor market. That is, entrepreneurs demonstrate a strong preference to seek informal funding from informals of the same sex. Moreover, female entrepreneurs often have difficulties convincing male informals because of different management styles of female business owners. But some women may be openly discriminated against by informal capitalists who feel women are less capable or trustworthy than men. A number of researches (Note 8) report that bankers perceive men to have more characteristics associated with successful entrepreneurship than women. Lucas (note 9) suggests that lending decisions are driven by issues of profitability, return on investment and the perception that investments are “relatively” safe. Such determinations can be made by examining the experience of entrepreneurs, information accessibility, liabilities of newness and size, and management style. Most of the time women have either no private start up capital whatsoever as mentioned above, or they have a smaller amount of equity capital available, for instance because of lower salary payment in earlier jobs or because family property is usually registered in the name of their husband (note 10), and are therefore less experienced with the acquisition of financial resources. In comparison to their occasional lack of knowledge having a solid business plan and growing potential of their business, this makes that investors do not tend to invest in women entrepreneurs.

Any other opinions on this?

Other people focus on the fact that female entrepreneurs are not often in venture networks. Lucas for example suggests that although some have suggested that inaccessibility to capital is a result of discriminatory policies, women entrepreneurs are often absent from important networks. Having access to capital markets requires knowledge about who has capital available and for what purposes. In reality however, this knowledge is not perfectly available and female entrepreneurs often find themselves at a disadvantage in this respect, because they are not part of the important networks that play a role in the capital markets (Note 11).

Another aspect that is important to investors nowadays is the personality of the entrepreneur invested in. Is the entrepreneur someone with a relevant business network? Does he/she have the right skills to be an entrepreneur, will he or she come up with new ideas when business is going down? Therefore, informal investors will rather invest in someone they know or who is familiar with their business friends or other venture capitalists.

What to conclude?

Venture capital can be of major importance for entrepreneurs in order to take their business to the next level. Not only is there a great emphasis on the financial resources themselves, the most important reason mentioned by many entrepreneurs is that most of the informal investors take an active role in the entrepreneurial companies they fund. In particular during the early stages of a company they may give advice on supplier and customer relationships, and provide in-depth knowledge about particular industries. As mentioned earlier, women do not have equal access to venture capital. Consequently they fail not only to get adequate financial support, but also to get the guidance and the access that venture capitalists can provide to the companies invested in.

Do you have any solutions?

A possible solution may be that informal venture capitalists explore the market of female entrepreneurs by adapting their investment strategies. Research will have to be done into what selection criteria can be applied to female entrepreneurs in order for investors to make the right investment decision. Female entrepreneurs may have to move closer to informal venture capitalists by adapting business strategy to venture capitalists, and go along with new ideas and possibilities.

Finally I will say that participation of women in the labor market is the indispensable next step in the process of both globalization and emancipation. Therefore, women need to take the next step, which may be facilitated by venture capitalists. Female entrepreneurs and informal venture capitalists have to join forces to work together towards a stronger global economy.

Note 1 and 2- Carter, S. & Jones-Evans, D. (2006). Enterprise and Small Business. Principles, Practice and Policy. (Second Edition). Harlow: FT Prentice Hall.

Note 3- Becker-Blease, J.R. & Sohl, J.E. (2007). Do women-owned businesses have equal access to angel capital? Journal of Business Venturing 22, 503-521.

Note 6- Rosa, Hamilton, Carter & Burns, 1994 as cited in Verheul, 2001

Note 7- Verheul, 2001; Becker-Blease & Sohl, 2007

Note 8- Buttner & Rosen, 1988; Fay & Williams, 1993 as cited in Becker-Blease & Sohl, 2007

Note 9 and 11-Lucas, L.M. (2006). Capital Accessibility, Gender, and Ethnicity: The case of Minority Women-Owned Firms. New England Journal of Entrepreneurship 9 (1), 41-48.

Note 4 and 10- Verheul, I. & Thurik, A.R. (2001). Start-up capital: Differences between male and female entrepreneurs ‘Does gender matter’? Small Business economics 16 (4), 329-345.

Note 5 -Carter and Rosa, 1998; Honig-Haftel and Martin, 1986; Neider, 1987; Hisrich and Brush, 1987; Olm et al. 1988; Johnson and Storey, 1993 as cited in Verheul, 2001

Other sources consulted: Greene, P.G. & Brush, C.G., Hart, M.M, Saparito, P. (2001). Patterns of venture capital funding: is gender a factor? Venture Capital: An International Journal of Entrepreneurial Finance 3 (1), 63-83.

Link: thenextwomen.com

Onderzoek O+ over female entrepreneurs and venture capital geplaatst op thenextwomen.com (deel I)

25 March, 2009 (12:50) | | By: marieke

During the recent years two remarkable trends have occurred in the economic sector: a striking growth of small entrepreneurs worldwide and an upcoming number of women participating as employees in the labor market. Indeed, an increasing number of women have started their own business. Thus, women’s share of business ownership is growing and research is done how these business are funded.

Marieke de Kort, founder of the Dutch on-line community for businesswomen O+ zakenvrouw van nu, has investigated the issue of gender, entrepreneurship and venture capital and has agreed to share some of her findings with The NextWomen. Part I is about the importance of venture capital for businesses and Part II why women are getting less of it.

What is venture capital?

Venture capital is finance provided to companies, mostly in exchange for an equity stake of the company or product. These financial resources are vital for an enterprise, since it enables the company to move into the second stage. It may be used for instance as an investment for product innovation or research and development. Venture capital is provided to companies by either specialist financial institutions or by informal venture capitalists.

Financial institutions such as banks offer loans to entrepreneurs. These financial institutions demand the payment of interest on the invested capital. Informal venture capitalists (or informals) on the other hand are mostly wealthy individual investors who are willing to invest in start-ups, early stage businesses or expanding enterprises, in exchange for stocks and bonds of the company.

Why are informal venture capitalists important for a business?

An informal venture capitalist can have two functions for a company: Firstly the informal provides the actual capital injection and secondly, he can offer either his advice or his network. Although this may seem trivial at first sight, such expertise and network connections may be even more important than the actual loan. For some entrepreneurs, it is one of the main reasons to solicit for an investment from an informal investor.

Are there differences between financial institutions and informal investors?

There are several differences between financial institutions and informal investors. One of the major differences with financial institutions is that private individuals are not listed on a stock exchange. Second, banks are often reluctant to lend money to small businesses because of low expected profit margins, asymmetrical information and high risks. Venture capitalists, however, are more willing to invest in these organizations, and are prepared to be less risk averse than financial institutions. The companies invested in are organizations which often have a limited operating history, are frequently too small to raise capital on the public markets and are too immature to secure a bank loan. In exchange for the high risk venture capitalists often take by investing in smaller and less mature companies, venture capitalists usually get significant control over the decision making process of the company, in addition to a significant portion of the company’s ownership.

For Marieke’s findings on informal capital and female-run businesses, see Part II of this series. (research used hereunder)

Carter, S. & Jones-Evans, D. (2006). Enterprise and Small Business. Principles, Practice and Policy. (Second Edition). Harlow: FT Prentice Hall.

Gaston, 1989 as cited in Carter, S. & Jones-Evans, D. (2006). Enterprise and Small Business. Principles, Practice and Policy. (Second Edition). Harlow: FT Prentice Hall

EIM, 1998, Kleinschalig Ondernemen 1998: Structuur en Ontwikkeling van het Nederlandse MKB, Zoetermeer.

Link: thenextwomen.com

The Next Women@Picnic

27 September, 2008 (22:15) | | By: marieke

Donderdag 25 September was ik aanwezig bij Picnic08 in Amsterdam. Op het mooie park bij de Westergasfabriek werd dit driedaagse evenement gehouden. Ik zal hier een uiteenzetting geven van mijn belevenissen tijdens mijn bezoek aan de 2e dag van Picnic.

Om 05:55 moest ik de trein hebben, nou heb ik niet zo’n problemen met vroeg opstaan maar kan ik nooit op tijd naar bed, met als gevolg: slaapgebrek.

Eenmaal gearriveerd op picnic ben ik mijn entreekaart gaan halen, kreeg ik mijn persoonlijk iktag en ben ik aangeschoven bij The Next Women breakfast, georganiseerd door Simone Brummelhuis van thenextwomen.com. Erg leuk om allerlei vrouwen te ontmoeten met verschillende achtergronden. Ondanks het vroege uur werd er volop genetwerkt en gingen de visitekaartjes al snel over tafel.

Tijdens dit ontbijt introduceert Simone: job swap. Op een kaartje schreef je wat voor dienst je te bieden had en waar je zelf naar op zoek was. Simone veilde onze kaartjes, een handige offline tool om mensen snel met elkaar in contact te brengen.

The Next Women brainstorm camp
Vervolgens was het tijd voor The Next Women brainstorm camp. Het woord was eerst aan Simon die uitleg gaf over haar initiatief Thenextwomen.com. The Next Women is ontstaan nadat de vraag ‘where is the female Steve Jobs?’ gesteld werd bij The Next Web. Simone wil met het platform hier verandering in brengen en vrouwelijk internet heroes op haar website uitlichten.

Marianne van Leeuwen
Marianne van Leeuwen, oprichter van miepkniep.nl, welikefashion.com en Sisteract sprak vervolgens over marketing tav vrouwen. Volgens Sisteract voelen vrouwen zich niet begrepen door traditionele marketing en zullen bedrijven rekening moeten gaan houden met de wensen van vrouwen. Dit omdat vrouwen steeds meer gaan verdienen dus daarmee ook kapitaalkrachtiger zijn. Daarmee zijn zij belangrijke spelers in het aankoopproces van diverse producten zijn. Lees hier nog een interessant artikel over Marianne in Sprout.

Rob Veldt
Na Marianne neemt Rob Veldt (Cash4idea) het woord. Mijn inziens paste deze presentatie niet helemaal in de ochtend van the next women. Aardige inhoud maar niet al te spectaculair gebracht. Daarbij denk ik dat op een congres als picnic mensen in de zaal wel weten wat crowdsourcing en creative collaboration is. Maar dat men op een dergelijk evenement alleen verdieping wil van bepaalde sprekers en discussie over toekomstige ontwikkelingen. Voor mij dus een beetje een tegenvaller. Rob introduceert vervolgens zijn bedrijf Cash4idea. Waarvan ik op het moment van de presentatie nog steeds niet begreep wat het nu was maar na wat gezoek op zijn site een aardig idee krijg. Je kunt op cash4idea ideeën bekijken, beoordelen en van kwalitatief commentaar voorzien. Daarnaast kun je credits opbouwen door bepaalde oplossingen of creatieve tools aan te dragen voor problemen. Tjah op mij komt het toch over als een kopie van brandfighters en battleofconcepts.

De contest
Dan is het eindelijk tijd voor de contest van de dag (ook al mochten we dat die ochtend niet zo noemen). 3 vrouwelijke internet ondernemers pitchen hun ideeen tav de jury en de zaal (voornamelijk gevuld met vrouwelijke ondernemers). De jury bestond uit:

Marjolijn Kamphuis – Founder Dutch Cowgirls
Lara Ankersmit – Director Telegraaf.nl
Marianne van Leeuwen – Founder Sisteract
Nathalie van Schie – TNO
Lital Marom – Manhattan Bridge Capital Inc, DAG Interactive

Maureen van der Brugh bijt de spits af met haar idee om creatieven te wijzen op de mogelijkheden die nieuwe videotechnieken bieden voor het maken van innovatieve videoclips. Helaas is Maureen een typische pionier en vakman. Ze weet heel goed waar ze het over heeft en is volgens mij ontzettend intelligent maar brengt haar presentatie zo warrig en met teveel technische implicaties dat het denk ik voor de helft van de zaal niet te volgen is. Zij krijgt dan ook als advies om korter te pitchen en 1 zin te vermelden wat het probleem is in de markt en welke oplossing zij daarvoor gaat bieden.

Petra Kroon, de tweede pitcher, wil met haar initiatief Goedgeefs zzp’ers uit Nederland koppelen aan ondernemers in derde wereld landen. Op zich een goed idee (en iets wat ik persoonlijk interessant vind) maar praktisch lijkt het me lastig uitvoerbaar.

Als laatste is Bianca Bode aan het woord. Met haar idee favs.nl wil ze een platform bieden waar iedere persoon online al zijn favoriete boeken, films, muziek etc op kan plaatsen en eventueel kan delen met anderen.

Vervolgens gaan de luisteraars in de zaal ieder met 1 van de 3 pitchers mee en wordt er in kleine groepjes nog verder gesproken over hun ideeen. Aan het einde van de ochtend wordt er door middel van stemmen een winnaar gekozen: Bianca Bode is de gelukkige en kan rekenen op steun vanuit thenextwomen met het uitvoeren van haar ideeen.

Na dit evenement vervolg ik mijn trip van deze dag naar de lunch. Hier ontmoet ik enkele blogsters van DutchCowgirls.nl. Leuk om iedereen een keer in real life te zien. Hierna dacht ik nog enkele andere events te bezoeken maar helaas kwam ik nergens binnen met mijn dagkaart (wat ik eerlijk gezegd niet helemaal had verwacht, kaartje kost toch 120 euro)!

Dus nog maar een beetje op het terrein rondgelopen waar ik water uit de tenq heb gehaald. Boodschap achter deze watervuller is dat veel kinderen sterven door vervuild water en ze een enorm lange waterpijp aan het aanleggen zijn om steun te bieden.

Heb ik nog een virtueel beestje tot leven laten komen met mijn iktag, oh jah heb ik ook nog een soort van virtuele sex gehad met een onbekende exposant. Waardoor onze beestjes samen weer andere beestjes creeerden en onze beestjes van structuur veranderden. Spannend!

Na dit wervelende avontuur heb ik nog verwoedde pogingen gedaan om in de inspirerende omgeving die picnic biedt een beetje te internetten maar helaas kreeg ik geen verbinding. Tjah en toen Picnic niet aan mijn internetverslaving kon voldoen, besloot ik de dag maar voor gezien te houden en naar huis te gaan.