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After bootstrapping her company for 2 years, Cynthia Francis, founder and CEO of Reality Digital, determined it was time to seek additional capital to grow the company.  Reality Digital provides hosted software to enable customers to offer the highly sought after social networking feature of easily creating and sharing videos, and is thus in a hot but competitive market segment.   She sought equity financing because “in software, showing that you’ve attracted venture funding is seen as market validation.  Also, certain markets like software tend to have these explosive growth phases.  We were watching competitors taking in millions in funding, so we wouldn’t have been able to stay competitive without it.”  The trick, she says, is to take as little as you can possibly get away with. 

Francis’ company was one of only a handful of women-led companies to receive venture funding in 2005.  Although women are starting businesses at twice the rate of the national average, the reality is that companies with women CEOs only attracted a paltry 2.9% of available venture funding last year, according to VentureOne, a subsidiary of Dow Jones, down from 4.52% in 2006.  In fact, this percentage has dropped nearly every year from a high-point of 7.55% in 2002.

To get behind why women-led businesses have received so little venture funding, we talked to Sharon Vosmek, CEO of Astia (www.astia.org), a non-profit organization dedicated to assisting women-led companies with access to equity funding, achieving and maintaining high growth, and leadership mentoring.  

Vosmek points out that “Women tend to have different networks than men, and venture funds tend to invest their money with people they know.”  Since only about 7% of venture capitalists are women, the chances are low that venture capitalists know most women entrepreneurs personally.  This is something Astia helps to correct by providing a network of over 400 investors, mentors and coaches to the companies accepted into their “it” venture conference program.   Astia’s well-attended venture program is responsible for attracting some $435 million to women-owned businesses, with drastically improved odds – over 60% of participating companies have received funding.   Conditions of acceptance into the program?  “The businesses need to be fundable,” says Vosmek. 

To be fundable, a business must show a significant growth opportunity – and here’s where Vosmek says women literally fall short, as they tend to be much more conservative on their estimates of market opportunity than their male counterparts.  “Here’s the difference – If a man gets a C in calculus, he thinks he has passed the course – he’ll believe he’s proficient at it, and discuss his expertise at it.  Yet if a woman gets a C in that same class, she feels like she’s failed, will hide that she took the class, and will likely avoid math classes in the future,” says Vosmek. “Women’s self-assessments are much more critical and they bring this into their businesses.  So we spend a lot of time building reality-based self-assessment skills which wind up sometimes significantly increasing the market opportunity, which puts it on an equal footing with others that get in front of investors.”    Many of Astia’s mentors and coaches are investors themselves, so the feedback comes right from those who write the checks. 

In fact, several companies get funded on the spot by the investors associated with the “it” conference program.  Sue Kunz, CEO of Solidware Technology, is one such company to score funding as a direct result of Astia’s program.  “I’ve attended a large percentage of these types of programs, but I found Astia head and shoulders above the rest.  They brought in these mentors that were very senior, and to have access to such top notch VCs, angel investors and CEOs was invaluable. They did a superb job across the board.”  Kunz recently sold Solidware Technologies and plans to tap Astia's network when she begins her next venture. 

The it venture program has become so popular that the difficulty is in getting accepted.  Astia only accepts between 60 and 75 companies a year, so they are looking for those with the best shot at success – then they take each company through a rigorous prescreening process, and spend about 2 months preparing the companies to present at the “final exam”, the it conference itself.  When asked how long they follow an entrepreneur, she noted “We don’t ever give up on them!  If they start a new company, many times they come back - It’s really based on how the entrepreneur chooses to engage us.”

Many of Astia’s classes, located in the San Francisco bay area, are open to the public.  At under $28 each they are a bargain opportunity to learn and network, even if you aren’t accepted into their venture program.  This year’s it conference is November 19-21 in San Francisco.  The application deadline is August 13, 2008 so take a chance - Your self-assessment might just be the thing that’s limiting you.

Astia is also looking for coaches and mentors to work with women entrepreneurs throughout the country.  If you’re interested in becoming a mentor, please inquire here.

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