Women in Private Equity? In Utah?

When Becky Anderson approached her banker for a loan to expand her bath and body lotions retail store company, For Every Body, he was skeptical. He said "Scented body lotions? If you meet your sales projections I will eat my hat." She was happy to return six months later, hat in hand, having exceeded her projections by 300 percent. For Every Body is now the nation's largest privately held woman owned candle manufacturer, with annual sales of $25 million and prime placement in the country's largest retailers, including Kohls, Lowes, Zellers and Walgreens.

Body lotion, scrapbooking, ‘modest' clothing are not exactly the kind of businesses that generally gain the attention - or backing - of venture capital and equity firms. Women owned and led businesses are no longer a niche market or a minority, but an economic force with economic power; and the proof is in the numbers. According to the Center for Women's Business Research, more than 10 million firms are owned by women, and these are not just nail salons. One in five firms with revenue of $1 million or more is woman-owned. They employ more than 13 million people and generate $1.9 trillion in sales. The Center found that between 1997 and 2006, the percent growth in women-owned firms was nearly twice that of all U.S. firms (42.3% vs. 23.3%). Businesses owned by women grow faster, employ more people and generate more sales than other businesses.

Utah is no exception. The Center states there are some 83,500 privately-held women-owned firms in Utah, generating more than $14 billion in sales and employing more than 100,000 people. These firms account for 37.3 percent of all privately-held firms in the state. Thirteen of the nation's hottest regions for women to start and grow successful businesses are here in the Mountain West.

So this fact may surprise you...Women owned businesses receive almost no venture capital investments. Dow Jones' research arm VentureOne recently found that only 4% of VC-backed companies had women chief executives, and those companies with women at the top received just 3% of the total investment capital raised. In other words, women owned businesses are not getting anywhere near their share of private capital.

Greg Warnock, one of Utah's best known venture capitalists, Managing Director of Mercato Partners and a frequent judge for the Ernst and Young Entrepreneur of the Year competition wondered why. "Year after year I saw these truly stunning businesses run by women...companies I had never heard of, that never came though the doors of our local venture investors. Any one of them would have made a stellar venture portfolio companies. They were simply not on our radar as investors, and to our detriment."

How can this be? Barbara Zimonja, CEO and President of Premier Resorts, has an idea. Like many entrepreneurs, she started her businesses with a credit card. When she needed capital to expand her business she was told to get her husband's signature on the loan. Only problem was, she did not have a husband. As Premier Resorts grew, the concept of private capital simply never came up. "No one ever suggested that I speak with private investors. I never heard the words Private Equity." Investment capital is a relationship business. Most businesses are funded through credible personal introductions to investors. "Women are simply left out of the conversation because they are not in the room."

Many who have looked carefully at this phenomenon agree with Barbara. Very few women are involved in venture capital leadership. One study by Forbes and the Harvard Business Review found less than 10% of venture capitalists are women. Portfolio Magazine went on a hunt and located six (yes, six) women in investment decision making roles in the entire United States. Because women are not in investment decision making positions, investors have missed out on the vast opportunities available in businesses started by women.

My previous business, O'Currance Teleservices, was an exception. I was fortunate that I had a woman banker at Zion's Bank named Jill Triwish. She introduced me to Todd Stevens of Wasatch Venture Fund (now Epic) who became my first investor. He was able to catch the vision of having home agents all over the valley taking inbound calls. Over the next thirteen years we grew the company to $22 million in revenue and eventually sold to a private equity firm in 2007. Todd's investment paid off for both his investors and O'Currance. Venture capital isn't just about money. It is also about connections, expertise and support. I simply could not have grown my business without Wasatch, and I would never have been able to sell it for the amount I did without them at the table.

But many women in Utah remain disconnected from this important source of capital. In July of 2007, I was part of an effort to survey of women business owners in to learn more about their experience growing a business and seeking financing. Forty five women Utah women business owners responded. We learned that that few knew about, understood or had sought funding from the most common forms of private capital: angel funding, private equity or venture capital. Women in Utah remain largely unaware of the benefits associated with private investment, do not know how to approach private investment groups, and do not know who to contact. Some women also feel that the lack of women in this space contributes to their inability to get in the door. As one woman wrote in response to the survey, "We are an early stage company with a very female oriented product and service in a very male dominated VC and Angel community."

For Every Body, Premier Resorts, O'Currance Teleservices, and hundreds of highly successful businesses like them, show that women's businesses are under-funded as a result of market inefficiencies, not because they are poor investments.

What is needed to bridge this gap, to tap this potential?

Barbara, Becky and I believe it is time to create a bridge between the proven potential of women's commerce and private investing. We have established VAST, a growth stage investment fund owned and managed by women. VAST is focused on the infinite number of women led businesses as well as this market's thirst for capital, knowledge and expertise to grow and prosper. VAST will create access to the most promising investment opportunities of women led businesses and support those businesses so they flourish.

In the coming months we'll be sharing what we learn with the readers of Pulse and hope you will stay tuned. We do not plan on eating any hats.

To learn more about VAST go to our web site www.vastequity.com.