By Ann Sullivan
According to my friends, Amy Millman, who runs Springboard Enterprises, and WIPP member Sue Malone, who funds small businesses through equity investments, legislation championed by Senators Maria Cantwell (D-WA) and Marco Rubio (R-FL) solves a problem that has been discussed for 20 years. Championed by WIPP, S. 1981, the Women and Minority Equity Investment Act of 2019,allows women-owned federal contracting firms to take investment by women-owned equity firms and still meet the “51% unconditionally owned and controlled” standard set by SBA to participate in the WOSB/EDWOSB program. Just as an aside, we also brought the minority-owned firms along with us in this legislation, allowing for minority-owned firms to invest in minority-owned companies. We thought it was important and the right thing to do.
It should come as no surprise that the numbers are abysmal when it comes to equity investment in women. According to Senator Cantwell, “the percentage of women-owned businesses rose from 4.6% in 1972 to 40% in 2018, but they still receive less than 4% of venture funding.” Equity investment is a term that encompasses venture capital, private equity and angel investment. Equity simply means ownership. In exchange for a percentage of ownership, the investor provides capital. An example of this investing at a very basic level is the TV show Shark Tank.
The flip side of the coin is that a major obstacle to investment in women-owned companies is that not enough women are investors. Only 8% of investing partners at the top 100 venture firms globally are women, according to an analysis by TechCrunch. Additionally, Fairview Capital’s 2018 Market Review of Woman and Minority-Owned Private Equity Firms shows significant growth in funds owned by women or minorities. The estimated 312 private equity firms have doubled since 2015 and represent roughly 10% of the market.
Currently, if a woman-owned firm wanted to obtain an SBA certification to participate in the WOSB/EDWOSB procurement program, she basically has to swear off any investments. We know a number of cases where women who took equity investment had to shut down their government business, which is completely counterproductive to the SBA’s mission.
This legislation is groundbreaking on both sides of the women-owned equation. It not only opens a path for investment in women-owned businesses who are government contractors, but also strengthens women investors, giving them a reason to ask for greater equity positions within their firms. It has been suggested to us that giving an incentive to women-owned equity firms to invest might change the dynamic in those firms. Women-owned companies looking for investment will be incentivized to ask for women-owned investment firms—we hope this will work favorably both ways. The same holds true for minority investments under this new legislation.
Any day now, a similar bill will be introduced in the House of Representatives. We fully anticipate this legislation will make it into law, doing away with a long-standing impediment to accessing capital. WIPP’s President, Candace Waterman stated upon introduction of this legislation, “we all know that access to capital is a barrier to entry and growth for women owned businesses. This bill will not only assist these businesses, it will have a positive impact on the financial industry, as it will spur growth for women-owned equity/VC firms. We applaud Senators Cantwell and Rubio for leading this breakthrough on an issue that has been an impediment to women’s business growth.”
