December 12, 2012
Interviewed by: David Snow
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Women Entrepreneurs Must Scale

Female entrepreneurs too often “fail to scale”–they are too often challenged in communicating to potential capital partners the ability of their business ideas to grow large, says Kay Koplovitz, Founder of USA Network and Chairman of Springboard Enterprises; and Kerrie MacPherson, Principal and Entrepreneurial Winning Women Executive Sponsor at EY. These two veterans of the entrepreneurial landscape give critical advice to capital seekers and share why they feel optimistic about the continuing advances women will make as business builders.

Female entrepreneurs too often “fail to scale”–they are too often challenged in communicating to potential capital partners the ability of their business ideas to grow large, says Kay Koplovitz, Founder of USA Network and Chairman of Springboard Enterprises; and Kerrie MacPherson, Principal and Entrepreneurial Winning Women Executive Sponsor at EY. These two veterans of the entrepreneurial landscape give critical advice to capital seekers and share why they feel optimistic about the continuing advances women will make as business builders.

David Snow, Privcap: We are joined today by Kerrie MacPherson of EY and by Kay Koplovitz, the founder of USA Network and also the Chairman of Springboard Enterprises. Welcome very much, ladies, to Privcap today.

We are talking all about private capital and its importance in the world of entrepreneurs and start-ups and business building. Both of you, though, have quite a bit of insight into women entrepreneurs. And so I’d love to hear about what is unique about the attributes that you see among women entrepreneurs and maybe how they would interact with a capital partner in helping to build their business.

Maybe starting with Kay: You’re a veteran of building businesses, backing businesses. And, of course, USA Network is probably the best example of that. Throughout all of these success stories and possibly some cautionary tales, what have you learned about the importance of getting the relationship right between the capital and the entrepreneur?

 

Kay Koplovitz, Springboard Enterprises: Well, I mean, there are many ways of going about raising capital. And one of the things that we do at Springboard Enterprises, which is a platform for training and introducing women to raise capital, is that you really—it’s the human capital that really gets you to the right place. So what you need to know before you go out to raise capital is, you need to sort of know who are your targets, who are the people who invest in the type of business that you have.

It’s a waste of time to go and try to pitch people that aren’t investing in your type of business, because you’re wasting your time and theirs. What you really want to do is—assuming that you’ve prepared your business properly and you are ready to go out—you’ve got to know when are you ready to go out, because if you go out to raise capital, whether it’s angel capital, venture capital, private equity capital, if you’re not prepared properly for those markets, you’ll get shut down and it’ll be hard for you to get back in. And I think that—so you understand what are the different capital markets to understand where your business fits in.

If you’re a lifestyle business, you’re not a venture-backable business by and large, but you may be an angel-backable business. If you’re a larger business and you need to have growth capital, you may be appropriate for the private equity markets. So that’s what you need to learn and need to know. So you have to study what are the capital markets—where do I fit? where do my businesses fit?—and go prepare it for that market. And the right target’s in that market.

Kerrie MacPherson, EY: David, if I can just add to that, I couldn’t agree more. And there’s nothing worse than going to talk with somebody who’s going to provide some form of financing at whatever level and not be prepared, because you never have a second chance to make that right first impression. And if you don’t know the details and you can’t give the answers, your ability to be a credible investee goes out the door.

Snow: Let’s talk about the rising influence and prominence of women entrepreneurs in the business landscape. Both of you have a lot of experience, a lot of passion for this topic. Let’s back up and say a successful entrepreneur is a successful entrepreneur. But is there something unique about the women entrepreneurs that you’ve seen, both by way of the attributes that they have and possibly some of the challenges that they have?

 MacPherson: I think—and Kay and I were talking about this just a minute ago—I think what we have found in the work we’ve done with entrepreneurial winning women at EY is women start businesses at a rate that significantly exceeds the rate at which men start businesses. They’re very successful. But what we have found is that, by and large, they fail to scale. So they don’t think big enough.

So a recent study that Babson College did identified five things that every good entrepreneur needs to do. And we think it’s particularly relevant for women. They need to think big. They need to be bold. They need to have a public profile that’s consistent with the business image they’re trying to project. They need to build advisory networks. They do need to seek financing, because you will reach a point at which it’s no longer possible to self-fund and your family’s out of spare cash. So they have to be big and bold.

And they need to work on the business as opposed to just in the business. And all good entrepreneurs do those things. And what we have found in working with entrepreneurial winning women is that when they take those five things and begin to execute consistently, that’s when businesses grow.

Koplovitz: Right. And as far as the women entrepreneurs that we work with at Springboard Enterprises—which we’ve been doing for 12 years, so we have quite a track record—they are in growth industries. So, differentiated from maybe lifestyle businesses, we’re in technology, biotech, life sciences, diagnostics devices, digital media, social media—the things that are really scalable. But even there, these people have already decided they’re in a business that they know they’re going to have to scale. They have to raise money. They know. And they have to scale. So they’re already in that frame of mind.

But even so, we are always pushing them to think larger, because they’re out against a whole group of people, both men and women, trying to get this capital. That’s who they’re competing against. And I can guarantee you that men will be much bolder about how much money they want, how they’re going to spend it, because they’re much more out on the ledge with that. They don’t mind being out there. Women are a little bit more thoughtful, careful, constructive about what they ask for and how they spend their money.

But here’s some wonderful facts that I think will encourage people and, I hope, women out there to realize that women will perform, because over 12 years of working with women entrepreneurs—and we have brought 509 to market out of 5,000 that we have looked at. These companies today have raised almost $6 billion. Eighty percent of them are in business over 12 years. They are growing rapidly. They have close to 20,000 employees. I mean, these companies are really contributing to the growth of our economy. And women are driving them.

And the return to the investors is really quite remarkable. I mean, we’ve had—almost 38% of them have had positive liquidity events, meaning selling events for their investors have gotten a good return. We’ve had 10 IPOs. And so they’re really… This is a growth sector for women. And I think that as we move—in the 12 years that I’ve been doing this, Kerrie, I have really been pleased with how women are starting to get into the DNA, into their language, into how they deal with the issue of investors. [It] is really improving every single year. And I think this is a good sign. I think women are really starting to understand what it is to scale a business and what it is to take in other people’s money to help that growth.

Snow: One final quick follow-up question. You know, what kind of a personality trait or what kind of an outlook would prevent someone from saying, “Yes, I’m going to take the steps to scale”? Is it maybe an inflated sense that they need to have their hands on all aspects of the business? Is it thinking that “I am the rainmaker, I am the tastemaker, and therefore I can’t sort of relinquish control of so many business functions within the company”?

Koplovitz: Go ahead, Kerrie.

MacPherson: I was going to say that’s where working on the business rather than in the business really comes. And we all know entrepreneurs who are the people who have the great ideas, and who build the idea to be something magical. But you reach a point where you can’t be the rainmaker, the person who does the books, the person who does everything. And so I think what things like Springboard, things like the Strategic Growth Forum help people recognize is, once you get close to that point where it’s too much for you and that you’re spending too much time doing things that other people could do so you could do the things that you’re the only one who can do, that’s where the leverage ability and the growth can come.

 Koplovitz: I don’t find it so much that women are afraid to find other talent. They look for other talent in their companies. I think it’s more a fear of letting go of the control of the company, financial control of the company. It’s a little… There is still a little bit of that among a lot of businesses.

I think that there are some men that have the same, you know, concerns, but I think [it’s] a little bit more prevalent among women. It’s a scary thought to a lot of people to understand that in order to get growth capital into your company, you’re going to have to give up some equity in the company. And what happens if I give up too much equity? I don’t have control anymore. But I need this capital to grow.

There are those people that understand owning 20% of a very big business is bigger than owning 100% of a very small business. And some people can’t make the bridge. And so I think that’s one of the elements that sometimes holds women back—the fear of losing control.

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