Owning It: For Nebraska Women Entrepreneurs, Unique Investment Challenges
February 26th, 2013
The number of women-owned businesses has increased by 54 percent in the last 15 years, but women still lag behind. Nebraska female business owners and entrepreneurs say the economics of investment and start-up capital are one of the biggest challenges.[audio:https://kvnonews.com/wp-content/uploads/2013/02/2-26-13-NET.mp3]
â€œHello! Four today? Right this way.â€
Over a glass of cranberry sun tea, while a waitress directs patrons to a table, Patricia Barron recalls her first forays into cooking with her grandmother when she was 6 years old. Biscuits, corn bread â€¦ everything she now makes for customers at her Omaha restaurant, â€œBig Mamaâ€™s Kitchen and Catering.â€
Barronâ€™s innate talent in the kitchen led to something straight out of Tom Sawyer â€“ that is, if the literary rapscallion were a quick-witted young black girl from North Omaha in the â€™60sâ€¦ and if the chore were cleaning linoleum floors instead of whitewashing the fence.
â€œI hated that job, you know?â€ Barron said with a shudder. â€œSo I would make tea cakes – which is a form of a cookie-cake thatâ€™s in the black community â€“ brownies and cookies, and then I would get other kids in the neighborhood to come in and do the cleaning for me, and Iâ€™d pay them off with food.â€
She laughed, still delighted all these years later at her success.
Over the last 15 years, American businesses owned by women have increased by 54 percent, a rate 1.5 times higher than the national average and twice as high as the rate for male-owned businesses.
In Nebraska, in 2012, female-owned businesses contributed $7.5 billion dollars to the stateâ€™s economy.
But thatâ€™s only one part of the picture. Despite their rapid increase, women business owners compose only 30 percent of the total, according to U.S. Census data. Only 4 percent of Fortune 500 companies are run by women â€“ and thatâ€™s the highest itâ€™s ever been.
â€œMost of the deals that we get involved with, unfortunately, you look around the table, and theyâ€™re all white males â€“ from the investment banker to the entrepreneur to the senior lender to the venture capitalist to the angel investors,â€ said Mark Crawford, CEO of the non-profit venture capital firm Invest Nebraska.
(Venture capitalists make a living from investing in other businesses; angel investors, on the other hand, donâ€™t view investment as a primary source of income. Think of them as â€œnicheâ€ investors.)
For most entrepreneurs, finding start-up capital is one of the biggest challenges â€“ but for women, itâ€™s especially tough. As of 2007, women start their firms with an average of 64 percent less capital than men, according to a report from the U.S. Department of Commerce.
There are several reasons for this. One? Women earn less than men; the national wage gap for women is around 77 cents on the dollar, meaning fewer savings to pump into an idea.
Single mothers have it even worse: 28 percent of families with a woman as a single, working parent were classified as poor in 2011, according to the Census Bureau. Thatâ€™s twice as high as single, working father families.
Gender stereotypes also play a role in womenâ€™s struggle to secure investment.
James Ramey, a lawyer with Invest Nebraska, said womenâ€™s ideas are sometimes disregarded as â€œhobbiesâ€ instead of careers. Several women who now run successful businesses said they experience this attitude, including an Omaha bridal designer and a Seward bed-and-breakfast owner.
â€œUnfortunately, right now, thereâ€™s sort of an old boys club,â€ Ramey said. â€œItâ€™s an established network, and unless you have somebody whoâ€™s connected, itâ€™s hard to break into that. And traditionally, that network has been men.â€
This could contribute to another factor: fewer women seek investment in the first place, even if they might be qualified. Karen Linder, an entrepreneur and angel investor from Omaha, said that could be in part because so few women are doing the investing. Only 8 percent of angel investors are women; 12 percent of venture capitalists are women. Linder said that could be intimidating.
â€œJust the level of comfort you might have with some other women in the room, particularly if youâ€™re pitching a product or a service where the market is focused on women,â€ she said. â€œAnd I think the womanâ€™s perspective can be different than a manâ€™s, and could help possibly increase the number of women being funded.â€
Of the forty or so Nebraska Angels members, maybe three are women, Linder said. (Watch her recent TEDxOmaha Talk on women entrepreneurs.)
Women also tend to focus on businesses in services and retail, which typically have lower profit margins than, say, a tech company â€“ meaning theyâ€™re not as appealing to investors.
Two Lincoln businesses that heavily rely on the Internet, for example, had less trouble finding investors: Boutique Window, an online software marketing tool for local retail businesses, and Bulu Box, a vitamin and supplement sample subscription service.
In fact, said Bulu Box co-owner Stephanie Jarrett, interested investors were the main reason she and husband Paul brought their company to Nebraska from San Francisco.
â€œWe thought, â€˜Oh, the moneyâ€™s on the West Coast, and itâ€™s in Silicon Valley,â€™â€ she said, explaining that they only pitched the company in Nebraska as a way to perfect their presentation. â€œNobody will ever agree to invest in us. But we flew back, and we pitched it, and we had some interest.â€
BuBulu Box now employs eight full-time workers and four interns.
Barron from Big Mamaâ€™s, who said she had a terrible time trying to get capital, suggested that more microfinancing programs would help women who arenâ€™t as successful in attracting capital. Banks need to be more flexible, as well, when it comes to lines of credit, she said.
â€œI was 65 years old when I started, and I couldnâ€™t find any banks to loan me any money,â€ she said. â€œThey said that I was too old, and that Iâ€™d never run a restaurant before. And they thought that was too much work for a woman.â€
Barron is black, and she and Crawford of Invest Nebraska said race plays a role, too. For example, Crawford said, minority women are often the first generation in their family to go to college.
â€œAnd there is a natural tendency to establish yourself first in steady careersâ€ like medicine, law and accounting, â€œbefore you take that risk.â€
â€œThat riskâ€ is that around 75 percent of start-ups fail.
But when it works, the payoff can be impressive. Barron, for example, is in the process of opening a second restaurant â€“ a sandwich shop.
I asked Barron what would help women, and in particular, minority women, open their own businesses: Get rid of all the white males, she said dryly.
But despite the additional hardships for minority women, they are making strides. Of all businesses owned by black Americans, for example, nearly half are now owned by black women.
This story is the first of a two-part special report on women business owners and entrepreneurs, “Owning It.” Part two airs tomorrow, Feb. 27, at 6:30 and 8:30 a.m. and 4:30 p.m. CT on NET Radio.
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