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High Technology’s Better Angels

Solid role models and a growing number of investor networks help female techies even the odds.
Illustration by Chi Birmingham

It’s 2013 and the high-tech industry is as evolved as ever, with a world of information at our fingertips, on every size screen imaginable. But as information proliferates, social change continues to move at a snail’s pace. Female leaders and entrepreneurs in tech businesses are still rare, and women everywhere—in every country, occupation, and age group—earn less than their male counterparts.

There are 20 women CEOs running Fortune 500 companies. Women represent more than half the U.S. population but only about 30 percent of American businesses are owned by women. Forty years ago, women owned just 5 percent of all small businesses.

And although women own about 30 percent of all businesses, they only capture about 11 percent of all receipts. They may not be entering high-growth businesses, like tech firms, at the same rate as men. The problem there could be that it is tougher to find and secure funding.

The U.S. Small Business Administration consistently finds that women-led businesses get less funding from venture capitalists than men. Some reasons given for this disparity include women’s lack of education in high technology, their underrepresentation among investors, or a lack of experience required by venture investors, research has found. In writing about high-tech markets for more than 15 years, I’ve observed that VCs invest in who they know more often than what they know. If you aren’t already in their social circles, you’re not as likely to get funding.

So, what can help women who want to start and run high-tech companies? Whitney Johns Martin, co-chair of Texas Women Ventures, has spoken about this for years and repeatedly points out two things.

First, women benefit from seeing more role models who have worked in high tech and have grown their businesses quickly. Second, women need resources that are accessible and aimed at them.

Texas Women Ventures is one of those resources. It invests in women-owned companies that are already doing well—typically with revenue of $10 million to $100 million—but need additional capital to grow their companies and maintain control. TWV helps women-owned companies stay women-owned.

Elsewhere, there are other groups kick-starting businesses, complete with strong female role models for entrepreneurs.

I spoke to Gabriella Draney in late June, as she was on her way to Silicon Valley to take her recent graduating class from the Tech Wildcatters startup bootcamp to meet with venture capitalists there.

Draney says that, for her last startup bootcamp, 400 startups applied and only 11 got in. She launched TechWildcatters, a start-up accelerator, because when she researched her second startup, she said it was too tough to find reliable advice: “I wanted to do a high-growth startup. And when I realized there were no resources, it kind of pissed me off.”

TechWildcatters is getting results. In September 2012, Gannett Co. Inc. bought Key Ring, a consumer rewards mobile platform. In May 2013, Dallas-based Lucent Mobile bought Proxomo Software Inc., another mobile software provider. Both Proxomo and Key Ring were past graduates of the TechWildcatters’ bootcamp.

The group works with software companies building products for use in other businesses, especially Fortune 500s. It believes in sharing some risk with the companies it helps. In exchange for between 2 percent and 10 percent of the startup’s founding stock, startups get a small amount of funding, up to $25,000, and the opportunity to connect with corporate-development teams and VCs. 

The high-growth startup Draney founded is perfecting the business of helping other startups find investors, find customers, and recruit talent. “There were maybe 30 accelerators in the world when we started,” Draney says. “There are more than 1,200 now.”

Draney said when she has launched companies in the past, she felt she was “held to a higher standard” because she’s a woman. “To me, that’s just another challenge,” she says.

On the west side of Dallas-Fort Worth, another role model for women entrepreneurs offers a completely different form of startup help. “I’ve been down the path that our clients are just getting started on,” says Darlene Ryan, executive director of TECH Fort Worth, who left a 20-year career as an international tax accountant and consultant to start a pharmaceutical company in 1994. She left that job in 2006 and soon after joined TECH Fort Worth.

“It’s just hard being an entrepreneur,” she says. “It’s hard.”

Unlike an accelerator, TECH Fort Worth is an incubator. It’s a nonprofit and makes no investments in the companies it helps. Its aim is to identify companies with proprietary technology that already have a good chance of success, and to offer coaching and mentoring to help those entrepreneurs commercialize their innovations.

North Texas is a great place to start a tech company, says Ryan, because the climate is friendly for businesses. “Here I really feel like I can make a difference,” Ryan says.

One TECH Fort Worth program of note is the Cowtown Angels, a network of individual investors that TECH Fort Worth helps pair with promising technology startups. As of June, Cowtown Angels had invested $1.4 million in four companies.

Ryan says that this program has several women as members and that alone is encouraging to potential startup CEOs. “When I started my career 20 years ago, I certainly didn’t see other women doing what I was doing.”

Ryan is correct that the number of women in the ranks of angel investors is climbing. In 2012, female angels represented 21.8 percent of the angel investor market, up from 8.7 percent in 2005, according to The Center for Venture Research at the University of New Hampshire.

As a group, angel investors in the United States invested $22.9 billion in 67,030 entrepreneurial efforts last year. Women-owned ventures accounted for 16 percent of the entrepreneurs who were seeking angel capital last year, and one out of every four of those female entrepreneurs received an angel investment.

“Women who have the capacity to do this kind of investing are coming out in droves,” says Loretta McCarthy, managing director of Golden Seeds, an investment firm that invests exclusively in women-led businesses.
A woman-led company is defined in this case as companies that have at least one woman in a C-level operating role who has significant equity and influence in the company.

To put some context around that investment point of view, consider this: Only about 22 percent of U.S. startups have a woman on the founding team. In the U.K., about 26 percent of startups do. All-female founding teams do exist in startups, but they make up just 2 percent to 3 percent of startups in the consumer Internet and enterprise software markets.

New York-based Golden Seeds is the nation’s fifth-most active angel investment group. And now, it has expanded into Dallas. It has 280 members across the United States, and 22 of its active members are in Dallas.

“Texas has a very evolved group of angel investors,” says McCarthy. “In the Dallas-Fort Worth market, you find a lot of Fortune 100 companies and a lot of diverse skill-sets and management experience.”

As of mid-June, Golden Seeds funded seven new ventures; two of those were Texas companies. Though Golden Seeds is not focused solely on funding tech startups, about 45 percent of the companies it funds are tech companies.

In the U.S. market as a whole, it is worth noting that the software sector alone made up 23 percent of all angel investments last year. Combine that with clean energy, media, and other tech-reliant areas, and it’s reasonable to assume that about half the angel money invested is aimed at high-tech companies of various sorts.

For female entrepreneurs, McCarthy says that, before seeking angel funding, it’s a good idea to raise funds from family and friends until you have enough of a track record to prove that you have a good business.

Groups like Golden Seeds are aiming to make sure female entrepreneurs are “seriously considered,” says McCarthy. But a secondary goal is to offer the empowerment that will someday lead to social change.

“Even the ones who didn’t get funding from us, they get a great deal of advice through various meetings,” McCarthy says. “Several of them take the advice, come back later, and they are funded when they’re ready.”