“Fundraising lessons from women entrepreneurs”

 NashvillePost, by David A. Fox, March 30, 2001

Women trying to access capital for start-up or early-stage businesses have never found a more receptive crowd in the venture capital community, but they still receive a paltry 5% of funds committed, a moderator at a Belmont University conference said Friday morning.

Not surprisingly then, raising money to fund small, female-run businesses is a time-consuming endeavor, yet there are certain actions entrepreneurs can take to facilitate the process, three panelist/business-owners told a crowd of more than 100 attending the presentation.

The panelists participated in a forum on "Women Entepreneurs Accessing Capital" hosted by Belmont's Center for Entrepreneurship Women's Programs.

Each of the women shared their experiences starting their company, raising seed capital, balancing private lives with business demands, and looking for additional capital to grow their businesses. Moderated by Laura Campbell of Laura Campbell & Associates, a business advisory firm, the forum offered helpful advice to women planning to build their own businesses.

The following provides highlights of each speaker's comments:

* Julie May, chief executive of bytes of knowledge. Founded in 1995, bytes of knowledge provides training on Microsoft Office and other software, web site services, chief information officer services, and systems engineering. Ms. May started it with $1,800 as a one-person operation, later raised $200,000 from Clayton Associates, and now employs 22 people.

Bringing in a financial partner added credibility to her business, Ms. May said. Very concerned about giving up control of her company, she ended up selling 35% of her business to the firm begun by former HealthTrust Chairman Clayton McWhorter.

"It's hard to give up your baby," she said, calling the relationship with angel or venture capital investors very much a marriage. "You must be able to answer to them, and you must be able to stand on your own, and then there will be -- in a positive way -- a lot of pushing and pulling."

Ms. May said --as did another of the panelists -- that she wishes that she had had some experience with the money-raising process before actually doing it, and said that she probably should have brought in an outside consultant to help her with it. Nevertheless, she said that she is very happy with her arrangement with Clayton Associates.

She credited her decision some years ago, while working as a media buyer, to go back to Belmont and get an M.B.A. with much of her success in expanding the company. She said that the financial knowledge she gained from coursework at Belmont gave her the confidence to build a business plan and present it to venture capitalists.

* Yonnie Chesley, chief executive of Gordian Health Solutions. Created in 1996, Gordian provides "comprehensive health management solutions." It has made three acquisitions and is currently negotiating four more. The company, which employs 110 people, brought in $2.5 million in its first raise with venture capitalists and has raised a total of $8 million. To fund the potential acquisitions, Ms. Chesley is trying to raise another $20 million.

"I wish that I had had someone on my team who had the experience of raising large sums of money from the beginning," she said. "Quite frankly, I just stumbled through it," she said of her initial raise. "I knew nothing about raising money, about being an entrepreneur."

Ms. Chesley had been a senior human resources executive at HealthTrust prior to founding Gordian.

She encouraged entrepreneurs to line-up multiple prospects for venture capital. The more you reduce the number of possible investors, "the more they have you over a barrel."

Also, she suggested using a fund-raising consultant who gets paid contingent upon their actually getting money raised. "Don't depend on your investors coming through for you. At the end of the day, you're the one who's accountable."

When asked if she has prospective investors sign non-disclosure agreements before revealing her business plan and financial statements, she said that many venture capitalists refuse to sign such agreements. Shortly after she founded Gordian, another group apparently got her business plan and tried to copy it. "I took a small degree of pleasure in knowing that the other company couldn't execute," she said.

As to any special challenges raising money as a female entrepreneur, Ms. Chesley said "I've never approached this from a female perspective and I don't think I've been treated any differently" by the financing community. "In the end, it comes down to the business plan and being confident."

* Cherryl Carlson, chief executive of Encore Interactive. Founded in late 1999, the company provides web-based customer support services.

Ms. Carlson's experience differs a bit from the other two panelists in that she was asked by others with capital to develop of business plan for a business. She raised $1.3 million in increments. "It's been a blessing that we didn't raise a lot of money and scale too soon because we'd be in a position of having large clients go away," she said of the experience of other companies tied to the success of the Internet.

She urged prospective entrepreneurs not to "underestimate the amount of energy you have to have to maintain your business, your family." The fundraising process is "continual" and will cut meaningfully into the time you would otherwise devote to your personal life.

She said that investment clubs can be good sources of capital for early-stage companies. The downside, however, may be that investment clubs often make relatively small commitments, making it necessary for the entrepreneur to invest more time pitching the idea to other prospects.