She Knows How to Play the Game

The startup revolution is as much about the democratization of capital as it is about
the creation of new technologies. So why do women-led companies still receive only
4.6% of all venture funding?

by Katharine Mieszkowski

from FastCompany issue 41, page 380

One simple statistic
both motivates and
haunts Denise
Brosseau: Of the
roughly $35.4 billion
that VCs invested
during the first half of
this year, Brosseau
reports, only 4.6% went
to companies that were
led by women. Her
personal definition of
victory is the increase of
that figure to 50%.

"Twenty years ago, the
issue was how to get
women into the debt
markets, how to get
basic loans to them
without requiring their
husbands to co-sign," Brosseau says. "Today, the issue is how to get women into the
equity markets. That is one of the last frontiers."

The story of Silicon Valley over the past three decades has been as much about the
democratization of capital as it has been about the creation of new technologies. The
vast amounts of risk capital entrusted to entrepreneurs to create new companies and to
invent new markets have fueled a frenzy of innovation that has reshaped the economy.
But democracy for whom? Do men have some kind of monopoly on worthwhile
business ideas? If not, what are the obstacles facing female entrepreneurs who are
seeking better access to venture funding?

As CEO and cofounder of the Forum for Women Entrepreneurs ( FWE ), Brosseau, 41,
heads a kind of nonprofit accelerator for women-led startups. Based in San Francisco,
with chapters in Seattle, Los Angeles, and Denver/Boulder, the FWE serves high-tech
and life-sciences companies that are seeking millions in order to get big fast. It is a
well-rounded entrepreneurial community that includes first-time entrepreneurs,
successful CEOs, venture capitalists, and service providers such as lawyers, who are
willing to lend a hand now in hopes of winning business from those growth companies
later. The FWE is a network of 1,100 members — men and women — that both
demystifies the VC process and wires women into it.

"Venture-capital funding is like anything else," Brosseau says. "It’s a system that you
need to figure out. There are a series of networks that you need to be a part of in order
to succeed. There’s a process whereby companies get funded, and women have been
out of that loop for a long, long time." To that challenge, Brosseau brings both the
sense of mission of a committed activist and the pragmatism and agility of a
natural-born entrepreneur. "VCs tend to fund people who they know, people who are
connected into their network," she explains. "If women are not connected through a
business-school classmate or through a buddy who they play basketball with, which is
often how the guys are connected, then we just have to create new ways into the
network. I can’t change the underlying behavior. But I can change who VCs know."

Springing It, Winging It

One of the central vehicles for changing who venture capitalists know is Springboard
2000, a high-profile series of "venture forums" created by the National Women’s
Business Council in conjunction with the Center for Women & Enterprise and with
Brosseau’s FWE. The Springboard 2000 sessions showcase women-led startup
companies that are seeking from $1 million to more than $25 million in financing from
investors. In January, Brosseau kicked off the first such gathering at Oracle
headquarters in Redwood City, California. About 350 attendees — 200 of whom were
either corporate, angel, or VC investors — turned out to see what ideas the women
entrepreneurs had to offer. Brosseau told the investors confidently: "We expect that you
each will leave today with the intention of investing in a least one of our presenting
companies."

Talk about underpromising and over-delivering: Within six months after the event, the 26
companies that were showcased that day had raised more than $185 million.

The mid-Atlantic Springboard 2000, which convened last July at America Online’s
headquarters, saw 44 pitches, with an extra half day devoted to entrepreneurs seeking
early-stage seed funding to meet the demand by angel investors. In November, a third
Springboard 2000 gathering was scheduled to take place at the Harvard Business
School, and New York and Chicago are expected to be added to the roster for next year.

What makes Springboard 2000 different from countless other high-technology forums
where venture capitalists size up business plans — besides that you’ll see more than
the same few token women onstage — is that the entrepreneurs receive extensive
coaching to make the most of their minutes in front of investors. Experienced startup
players train the recruits on crafting their market projections, refining their presentation
skills, and even enhancing their sense of showmanship.

Indeed, it’s at the intersection of networks of power and nuts-and-bolts entrepreneurial
education where the FWE does much of its work. For three-and-a-half years, the forum
has been offering its own boot camp for startups, called "the eSeries," where success
is measured in millions of dollars raised. The program takes 15 to 20 "students," each
of whom is starting an early-stage company. The entrepreneurs as a group choose
which seminars they’d like to take over the three months: negotiating a term sheet,
building an A-list board, determining your company’s valuation, hiring talent, doing
deals, and, above all, pitching your business plan. Classes are taught by top-tier VCs,
attorneys, and CEOs — all of whom become contacts for the students after the classes
end.

Over the long term, the students form a kind of cohort, an instant alumni network of
other entrepreneurs at their same early stage, whom they draw upon as they travel the
startup road. So much for the outmoded picture of the lone-wolf entrepreneur going it on
his own. "You can be more successful if you collaborate," says Brosseau. Indeed,
some 20 to 30 messages per day are distributed on the FWE email list, which helps
the group members tap into one another’s networks: Does anyone have any contacts at
this company? Which PR firm is still taking on clients? What’s the going rate for a
director-level marketing person?

For all of FWE’s emphasis on training and education, though, Brosseau says that her
most basic message to first-time entrepreneurs is: "Be bold. I kiddingly say that I give
chutzpah lessons. So much of this is about having the wherewithal and the confidence
to believe that you can do it. Women tend to spend way too much time preparing
instead of just winging it. And the fact is, we can succeed by just winging it. There are
times when taking a leap is better for you than taking another course."

One FWE event that’s all about winging it is a sort of entrepreneurial dating game called
"Get Connected." In fact, it was originally called "Entrepreneur Match.com," until a dating
service with a similar name objected. Contestants display their skills — marketing,
finance, operations — with a colored dot on their name tag. Strangers form instant
startups and then race to create out-there business ideas in just a few minutes,
complete with a one-page summary. After the "companies" do their pitches, the winning
groups get a dinner for four together. "If in 20 minutes they could come up with
something that creative and could work that well together in a situation where they’ve
never met, who knows what could happen over dinner?" asks Brosseau.

Starting Up the Startups

Denise Brosseau knows what startups need because she’s exactly the kind of startup
addict that she now helps get funded. "I have the bug," she grins. "I totally have the bug."
She’s gone full throttle on no fewer than five startup companies herself, including a
computer consulting business that she ran in her spare time while she maintained a
full-time senior-executive job at Broderbund Software.

At her first startup, a Washington, DC-based travel agency, where she was employee
number two, she worked 16 to 18 hours a day, 7 days a week, for 7 months — with only
3 days off. "It was hell," she says now. At the age of 24, she ended up in a hospital,
utterly stressed out, with a kidney stone. And that’s not her only startup battle scar. At
Friend Technologies, a Bay-area company, the staff went from 18 employees to 80,
dropped to 25 employees, jumped back to 80, and then had a total meltdown — all in
one year.

For the past seven years, however, Brosseau has focused her energies on helping
other women entrepreneurs navigate the treacherous startup waters. The Forum for
Women Entrepreneurs, which began in November 1993, grew out of a research project
by Jennifer Gill Roberts, a business-school classmate of Brosseau’s. The study
analyzed why women entrepreneurs weren’t getting funded. ( Back then, women-led
companies were receiving less than 2% of all venture-capital funding. ) "She concluded
that women needed more knowledge about the venture process," says Brosseau, "that
they needed better and stronger networks with one another, and that they needed
access to attorneys and accountants, as well as to investors, so that they could move
their businesses to the next level."

Thus was born FWE. When the group reached 250 members in the summer of 1997,
Brosseau wrote a business plan. Months later, when the group’s membership reached
350, she quit her job to run the organization full time.

Brosseau concedes that progress thus far has been slow but steady: The percentage
of VC funds to women-led companies has gone up from less than 2% of $4.9 billion, or
$98 million, in 1993 to 4.6% of $35.4 billion, or $1.6 billion, in the first half of 2000. And
she insists that the pipeline is now primed with women who have the experience
required to make a huge impact. From 1998 until the first half of this year, for example,
the percentage of venture-financed startups with a woman on the senior-management
team jumped from 21% to 43%. The women on those teams will be in a good position
to go for the CEO slot at their next startup.

"The VCs will tell you that they fund people with a track record, who they’ve heard of, or
who work for companies that have done well," Brosseau says. "They fund people who
have been funded before. I am about making sure that the pipeline is full, training
people along the way, and getting that statistic up. We have given women the
experience that VCs are looking for. There are more and more women starting and
running bigger and bigger companies."

Katharine Mieszkowski ( [email protected] ), a former senior writer for Fast Company, is
a senior writer for Salon.com. Contact Denise Brosseau by email ( [email protected] ).

Sidebar: Lessons For Loot

Denise Brosseau’s primary role is that of entrepreneurial connector. She amasses the
speakers and teachers, the coaches and mentors, so that women-led companies can
get up to speed faster. "You don’t wake up one day and know how to do this," she says.
"You can learn it at the school of hard knocks, but I believe there is a better way to learn
your lessons."

The first lesson that Brosseau teaches: VCs don’t bet on desperate entrepreneurs.
"VCs want to be a part of success. They want to be part of the avalanche of money that’s
going to wash over you." One entrepreneur told Brosseau that she was so tired of being
turned down that she stopped feeling discouraged and started to get mad. Anger was
more effective. In her next pitch meeting, she all but pounded her fist on the table as
she explained her company. She got funded.

Brosseau’s second lesson: While passion is good, greed is bad. She tries to rank the
entrepreneurs she meets on what she jokingly calls the "greed dotcom" scale.

The third lesson: Do take "no" for an answer — then figure out how to change it to "yes."
Entrepreneurial folklore holds that entrepreneurs never listen when they hear a "no." But
Brosseau encourages FWE entrepreneurs to listen most carefully at that time. Why are
investors saying no? When entrepreneurs are striking out with funders, part of her role
is to help the entrepreneurs ask themselves the toughest question: "Am I fooling
myself?" Maybe the first 100 people who said "no" were the wrong hundred people, or
maybe your pitch is off.

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