In full disclosure, when I developed this topic, I didn't have a concrete
thesis, I just had a question: Do our male counterparts look at equity the same
way that we do? I've seen many women entrepreneurs distribute or sell equity,
and it was a well-discussed issue in my own business. As businesswomen, we try
to be smart about our choices, and knowing what drives big ones like giving
equity deserves to be explored. Is our desire to share equity about a natural
instinct for collaboration or a deep-seeded insecurity about our own company's
value?
I spoke to two experts on women-owned companies, Erin Fuller, executive
director of the National Association of Women Business Owners, and Amy Millman,
president of Springboard Enterprises, whose organizations represent opposite
ends of the business spectrum.
NAWBO's membership includes 9,000 women-owned businesses, with 80 percent
having revenues of $1 million or greater. The majority of NAWBO members own
traditional businesses. Springboard focuses on women-led, high-growth companies
that require venture capital or outside equity. These are the high-risk,
high-reward companies, often in technology or biotech, where giving up equity
for investment dollars is required. There's typically a three- to seven-year
horizon to grow and then sell or go public.
Fuller and Millman's feedback showed that equity distribution is complex and
a dramatically different issue depending on what type of company a woman owns.
The lessons, however, are relevant to all women entrepreneurs.
Traditional Businesses: Keeping Control
Most women-owned businesses fall into this category. One of the top reasons
women start businesses is to gain control over their lifestyles and careers. And
while women are strategic about giving equity, they aren't overly eager to give
up what they've worked so hard to build.
Equity is one thing, control is another. Fuller rejects the perception
that women want to keep their companies small for personal reasons. She says her
member companies commonly use equity for strategic growth by distributing to
employees or outside partners, or in mergers. However, a 10 percent equity share
is far different than a majority share. Women business owners want to grow, but
they want to do it while keeping control.
Equity is the ultimate benefit. Women are more likely to give benefits
to employees (7 percent more than male-owned companies, according to Fuller) and
to focus on opportunities for their teams. Equity is used as a way to form a
growth path for top talent. Women-owned companies are often smaller and younger
and have fewer dollars, so equity is a golden carrot to get the best people
onboard.
High-Growth Businesses: Starting to Fight for
It
Springboard's membership of high-growth companies has its own unique set of
challenges surrounding equity. It's a given that for these companies to make it,
they'll give up most of their equity to investors. There's almost no chance the
founder, male or female, will maintain a majority share, and it's not uncommon
to have only 10 percent. At issue for women entrepreneurs in this category is
whether they fight strongly enough for the price of their shares, the amount
they can keep and their position as CEO. Millman believes that women are
learning fast.
Finding investors is a huge hurdle. Millman reiterated a topic I
wrote about recently: Women receive a paltry 5
percent of venture capital. This can lead women to accept bad terms around
equity, so we must negotiate carefully.
Women are getting smarter about the equity game. The last decade has
been a watershed time for women's growth businesses, according to Millman. She
sees women getting much smarter about the process and learning how to fight and
win what they want. Millman was quick to point out that in the '70s there were
still male and female classified ads, so women have had a mere 30 years working
the choice jobs required to learn how to start and run fast-track companies.
Women need to stretch into the CEO role. Women entrepreneurs tend to
be very company-minded and can be too quick to give up their CEO spot if they
believe it's for the good of the business. We are more likely to stick to what
we know and overlook our ability to do the top job, Millman observes. But
there's a first time for everything, even being a Fortune 50 CEO.
The Push/Pull of Control and Risk
In the end, there isn't a clear conclusion about women entrepreneurs' views on
equity. It's individual and depends on the type of business we own and our
reasons for operating it. However, two pieces of cautionary wisdom did come
through:
- We have to be aware of our desire for control and not let it limit us.
Taking on partners or merging could actually provide more personal
satisfaction, for example, if the load is adequately shared and
opportunities are expanded.
- We can learn from our male counterparts about
taking risks. Whether we're taking a chance
on ourselves to fight for the CEO title or acquiring another company for
growth, sometimes the anxiety we feel might just be growing pains.