Funding Flat for Woman-led Startups

When Cindy Padnos set out to raise venture capital a decade ago for Vivant, her workforce management software startup, she could have used a mentor or two.

“There was no one to help me figure out how to negotiate a term sheet,” says Padnos, now a managing director at early stage fund Advanced Venture Partners in San Francisco. Getting introductions to potential investors, she says, was also challenging, given her lack of experience with networking in venture circles.

Today, those hurdles would seem to be easier to overcome. Networking forums and mentoring services abound for female entrepreneurs. Padnos, a board member at San Francisco-based mentoring organization Astia, is one of the organization’s many volunteers who advise startup entrepreneurs.

To date, however, expanded resources for female entrepreneurs haven’t translated into increased venture fund-raising. Currently, Astia estimates that women-led companies receive about 4% of venture capital dollars invested in the United States, down from 7% in 2001. Padnos and Astia executives and board members, who attended this fall’s conference at the Microsoft campus in Mountain View, Calif., say that the numbers are dropping for a number of reasons.

“We look at what precludes women from participating in high-growth companies,” says Sharon Vosmek, CEO of Astia, who adds that women entrepreneurs are much more likely to bootstrap and run their own small companies rather than attempt to grow them by raising venture funding.

Lack of connections is a common theme as to why female entrepreneurs lag in venture fund-raising. This is a shortfall that Vosmek is working to address. Two years ago, she says, Astia had fewer than 100 volunteer mentors and advisors. Now there are more than 300 who are currently working with 70 startups. Astia, formerly known as the Women’s Technology Cluster, has also been growing beyond its Silicon Valley roots. At this year’s conference, 40% of presenting companies came from outside the San Francisco Bay Area.

Life sciences startups dominated this year’s conference, which was a switch from previous years. Eighteen of the 29 entrepreneurs who presented pitches at Astia’s conference were in biotech-related fields. They included Caveo Therapeutics, an Aurora, Colo.-based developer of therapies for blood disorders; Lipomics, a Sacramento-based developer of products for analyzing lipid metabolism; and DNA Direct, a developer of Web-based tools for interpreting genetic test results.

The slate of startups was principally made up of early stage companies, although a couple of previous Astia presenters returned to raise Series B rounds. Founders of industrial lighting startup Mobius Photonics, which raised $4 million two years ago, were seeking a follow-on round of between $5 million to $10 million. Executives at Solidware Technologies, a developer of software project auditing tools, raised $2 million two years ago. The company was seeking another $5 million.

Astia has also mentored six portfolio companies that have matured to exit, including Napa Pharmaceuticals, which went public on the London Stock Exchange. Other companies remain privately held but are generating a profit.

One such company was MsMoney, one of 10 companies incubated by Astia in 1999, when the organization launched. Founder Tiffany Bass Bukow, who raised $3 million for the women-oriented financial portal, says the company is profitable.