The Question of Control

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:

1. 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.
   
2. 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.