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Beating the Odds-Who says women can’t raise venture capital?

Not these three
entrepreneurs, who pitched their businesses and walked away with millions of dollars.

Fortune Small Business

By Bridget McCrea

Patricia McPeak knew that the chances of finding venture capital for her two-year-old
nutraceutical manufacturing firm, NutraStar Inc., were slim when she began her search in
April 2000. Investors were still licking their wounds after their dot-com and technology
investments went south.

But that didn’t deter the 62-year-old chairman, president and CEO of the 12-employee firm in
El Dorado Hills, Calif. McPeak had earned her stripes founding Brady International, which she
says was the first company in the U.S. dedicated to developing a method to converting
underutilized raw rice bran into food. After the company went through a hostile takeover,
she co-founded The Rice X Company, which was involved in similar pursuits, and finally
NutraStar. Based on this experience, she knew that she needed at least $1.5 million to build
her inventories and develop an e-commerce infrastructure.

Confident that outside investors were the best source of capital for these purposes, she
tapped her business contacts and asked attorneys she knew for introductions. McPeak
soon found herself with a list of potential investors in the nutraceutical industry to pursue.
"We formed strategic alliances with individuals who knew our marketplace, and who were
connected to high net-worth individuals interested in emerging growth companies like ours,"
recalls McPeak. "They realized the opportunity in our market."

Her strategy worked. In December 2001, NutraStar received a $1 million round of funding
from the Hoopika Capital and The Mercator Group. The company simultaneously restructured
most of its outstanding debt and accounts payable by converting about $2 million to a newly
issued series of preferred stock. "The end result was a greatly improved balance sheet and
a public company which availed us of many more sources of additional capital," she says.
The company posted $1.6 million in revenue last year and expects to reach both profitability
and $8 million in sales for 2002.

McPeak knows she beat the odds. Only about 6 percent of the $36.5 billion that venture
capitalists invested last year went to female-owned firms — up only slightly from 3 percent in
1998, according to the National Venture Capital Association in Washington, D.C. That’s
despite the fact that women owned businesses are being created at twice the rate of male
owned firms and staying in business longer, according to the U.S. Small Business
Administration. Based on U.S. Census Bureau data, the SBA estimates that there are 6.2
million women-owned firms today.

Although corporate America has been slow in trusting women CEOs, it’s not just the old
boys’ network that’s holding women back from finding funding. In reality, few women
actually seek venture capital, says Julie Ronlov, senior associate for Forward Ventures, a
San Diego-based healthcare and life sciences fund. "We see about 1,500 business plans a
year and less than one percent are from women-owned companies," says Ronlov. "I’d
guess that we’ve had less than six women present in our office in the last nine to 12
months." Some were senior executives, rather than the owners, of the firms they
represented. Why women avoid looking for venture capital is an open question, but Ronlov
believes that many women don’t yet have the career experience that would give them
comfort in working with venture capitalists.

In the current climate, the women who seek venture capital and win it tend to be those with
well-developed networks in their industries. For instance, Allison O’Connor, president of the
upscale garden retailer Poppybox Gardens, Inc., in Portland, Ore., had worked for years in
the specialty retail business community before going solo, and she wasn’t shy about pitching
her ideas to colleagues. Her personalized approach worked: The 30-employee company,
which posted $2 million in sales last year, got its first $1.7 million infusion from CB Capital
LLC and angel investors Stan Amy and David Billstrom in 1999. A second infusion of $2.8
million came in 2000 from D3 Family Fund, Erickson Capital LLC and angels Don Dorsey and
William Neushauser. Poppybox recently closed on a $1.35 million third round from Synectic
Venture II LLC. The company used the money to open three retail stores in Oregon and
Arizona and to pay for operations.

Siki Giunta, president and CEO of McLean, Va.-based Managed Objects, a 100-employee
company develops a business service management (BSM) software platform known as
Formula(r), also managed to raise venture capital, although being a woman made her a rare
presence at fund-raising forums. "Maybe they don’t remember me for my business," says
Giunta, "but they will always remember me because I’m in the only woman they’ve seen in a
while." Rather than get psyched out because she was the only woman in the room, she
saw it as a way to stand out. She typically did plenty of homework ahead of time, preparing
a "due diligence" book for all interested investors that includes information about the
company’s business plan, financials, and management team. "We’ve also had a good pitch
and presentation that was chock full of customer anecdotes and quotes," adds Giunta, who
says VCs were impressed by her focus on customer satisfaction. "I run the company with a
`back to basics’ business model, which includes managing it as if it were a public company
and ensuring that every customer is satisfied," says Giunta. "As a result, we’ve more than
tripled revenue growth while also maintaining our focus on delivering real value to
customers." Her diligence paid off. Her company walked away with $13 million in venture
capital in February 2002.

Bridget McCrea is based in Clearwater, Fla. Write to her at [email protected].

http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=209141

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