This Time It's Mine

Why high-powered women are leaving Corporate America to become entrepreneurs

Ann Buivid used to be bothered at corporate meetings by the "great quacking noise" of people talking too much, yet saying too little. She hid her pregnancy for five months because she worried she might be passed over for a promotion if her boss found out. And she found herself speaking up at meetings, even if she didn't have anything vital to say, because her boss told her he didn't like it when she "shut down."

All that is history. These days, the 53-year-old veteran of General Foods, Black & Decker, and Remington Products has no one looking over her shoulder. In 2002, Buivid left her post as president of Remington's personal care division. A year later she co-founded Artemis Woman, a $4 million, five-employee home spa products company in Wilton, Conn., with former Remington colleague Lisa Kable. "The guys used to say, 'It feels like you are one of us,'" Buivid recalls. "But that took a lot of work. You are constantly compensating for being in a man's world." So Buivid is building her new company to reflect her own values and management style. "People aren't pigeonholed; there's not a lot of memo writing and reporting in," she says. "People say what they are going to do and they do it."

Buivid is hardly the first woman to bail out of Corporate America. The dearth of women in high-ranking positions at America's largest companies has long been a subject of concern and debate. Women represent 46% of the nation's workforce but hold just over 6% of the highest-paying positions in the largest 500 companies, according to Catalyst, a nonprofit research and advisory group. The reasons are many, of course, including family-related issues and barriers to advancement. But an elite group of corporate achievers is leaving for another reason: These women want to do it their way. That means starting their own company and running it according to how they think a company should operate. "I wanted to take everything I had learned and do it for myself," says Laila Razouk, 57, who was vice-president and general manager of chipmaker Advance Micro Devices $200 million network products division before co-founding BioVitesse, a seven-employee San Jose (Calif.) life sciences startup. She invested a good bit of her own money in the venture and initially didn't take a salary. Says Razouk: "Some people said, 'Are you out of your mind?' But we have to follow our passions."

Little research has been done on this cadre of entrepreneurs, and it's not easy to nail down its size. BusinessWeek SmallBiz tracked down 18 of these high-powered women to discover why they traded the relative security of a big company for a startup, and to find out what their experiences can teach other entrepreneurs. Working with executive recruiters, women's business groups, venture capitalists, angel investors, and other successful entrepreneurs, we identified women who had left senior positions at large companies, where they typically had profit-and-loss responsibility for multimillion-dollar units, to start their own companies. Also included were a handful of women who took the helm of existing small companies in order to transform them. Amy Errett was one. She launched the investment management and asset-based products groups at E*Trade, and then left that company in 2002 to become CEO of Olivia, a San Francisco travel and services company catering to lesbians. Revenues at the 35-year-old company have since tripled.

Without question, this is an accomplished group, and one that refutes stereotypes. Only a handful fled their companies to carve out more time for a personal life. They didn't feel that they had hit a ceiling, glass or otherwise. The majority say they could have continued rising at their companies or become top honcho at another large company, though the latter didn't hold much appeal. If a big company is looking outside for a CEO, "90% of the time it is a company in trouble," says Barbara Nelson, who used to run a $3 billion division of data storage company Quantum and who became CEO of NeoScale Systems in 2003. On her watch, NeoScale, a storage security hardware and software startup in Milpitas, Calif., has grown to 95 employees from 30.

Only 2 of the 18 women on our list mentioned making more money as their primary motivation. Most tellingly, perhaps, the push to entrepreneurship often came not so much from a eureka moment as from a desire to run a company of their own.

Almost half are running high-tech or life sciences companies. That's because, throughout their careers, many gravitated to dynamic and fast-growing business units or companies, where they found hierarchies less entrenched and bias less of an obstacle. At rapidly growing companies, says Nelson, "It didn't matter if you had five heads as long as you could get the job done."

It comes as no surprise that such high achievers have lofty ambitions for their new ventures. Almost every woman on the list expects hers to be a high-growth enterprise, and most are well on their way. Of the ten companies that have posted revenues for at least two years, eight had double-digit sales growth last year. That's stellar performance, considering that sales for all privately owned firms fell 1% between 1997 and 2006, according to the Center for Women's Business Research. No doubt the choice of industries partly explains that strong showing.

Those choices have also helped them lure investment. Five of the 18 women on our list raised venture capital for their companies. But less than 1% of the 500,000 companies created in each year from 2000 to 2002 raised venture capital, according to Clearing the Hurdles: Women Building High-Growth Businesses by Candida Brush, Paul T. Babson Professor of Entrepreneurship at Babson College, and four other researchers on entrepreneurship. And women-led businesses attract only a tiny fraction of that investment. In 2003, women-led firms received 4.2% of the $19 billion in venture capital invested that year, according to a study by Growthink Research, a market research firm, and re:invention, a Chicago marketing firm that helps clients reach women executives and entrepreneurs.

Of course, entrepreneurship is never a sure thing, and these women, despite their advantages, have taken their share of lumps. Before starting BioVitesse, Razouk was president of a Palo Alto (Calif.) wireless startup called Fantasma Networks. But when the telecom bubble burst, she had to sell the company quickly. In 2000, Elizabeth Funk, 38, left Yahoo, where she had launched its shopping service, and the next year became CEO of investment firm cml Global Capital. Although Funk doesn't regret her move—she says Yahoo became less fun as it got bigger, and she now has more time to spend with her family—she does miss the adrenaline rush. "At Yahoo you worked 80-hour weeks," says Funk. She's glad her position doesn't involve those "crazy hours," but, she says, "I'm a lot less passionate about it." At some point, she says, she'll likely return to a high-tech startup.

Still, no one is rushing back to her big-company office. Small companies are giving these entrepreneurs a chance to do the things they most enjoy, and to do them by their own rules. "Ninety percent [of a senior corporate job] was preparing documents, dealing with budgets, and presenting to the board," says Artemis Woman's Buivid. "I wasn't doing what I loved—consumer marketing." Gwen Edwards left her post as head of a $400 million networking division of sbc to become CEO of Middlewire, a small telecom that soon shut down. Now she's in the midst of starting an Internet and wireless services company. "I would love to create a culture, a company, and an environment that I would long to work for."

With all the talk about a revamped work culture coming from women who initially thrived in a corporate environment, it's fair to ask if these women are actually walking the walk. Are women more driven to abandon Corporate America because it does not reflect their values and management styles, and do the companies they subsequently create have different cultures?

"Anecdotally, you hear that [issue of culture] more from women," says Brush. "There are personal values that women tend to attach to organizations. And if what is important to them is not matched by the organization, that can create a conflict." Juli Ann Reynolds, president and CEO at management guru Tom Peters' consulting and training firm, is leading a study to determine which traits characterize women-led businesses. Early results suggest that the culture of women-led companies tends to be collaborative and team-driven. Previous studies of businesses headed by men, says Reynolds, have found widely varying cultures. The question is whether women-led companies will show a greater commonality.

Some women contend that successful managers, male and female, are more alike than not. But many on our list say their style is different. At Olivia, Errett says even though she is a decisive manager, she encourages dialogue and collaboration—things she wishes had been more common at E*Trade and the other big companies on her résumé. Top managers set meeting agendas at those companies, so now Errett asks every attendee to contribute agenda items, something Buivid also does at Artemis Woman. Errett begins meetings by asking each employee how things are going, to get a quick read on who is feeling burned out and who is grappling with a problem.

Buivid says she used to take heat for being soft on employees, for trying to understand why someone had failed, and for seeking out ways to remedy the situation before firing them. That's up to her now. She admits that the small size of her company makes collaboration easier, but adds that men often create more formal, corporate environments from the start. "I've met tons of male entrepreneurs who from day one had nice offices, a waiting room, and all the trappings," says Buivid. "It was all about looking corporate."

Although they're extremely ambitious, these women want to put an end to the cutthroat competition they witnessed at their former employers. After seeing managers dress down employees in public early in her career, Nelson has made it a goal at NeoScale for criticism to be done privately, and praise to be given publicly. Cecelia McCloy, the 52-year-old co-founder of Integrated Science Solutions, a Walnut Creek (Calif.) science and engineering firm with $9 million in sales, says she specifically set out to create a company that was friendly to families. Her employees also get eight hours of paid time off per year to participate in civic or charitable activities—say, to volunteer in their children's classroom. Last year, about 20 of her 75 employees took advantage of the option. And every month, she asks managers to give her information on employees who did something exceptional for customers or their colleagues. McCloy then writes a thank-you note to those folks.

These former corporate stars had no illusions that starting their own companies would mean slowing down. That's good, because many have found their lives as entrepreneurs to be just as demanding, or in some cases more so, than their big-company careers. The upside is that they have greater control. Olivia's Errett says her desire for more flexibility influenced her decision to work for herself. She says being CEO of a smaller company means that if her partner can't pick their daughter up at school, she can. For entrepreneurs who didn't set out looking for more personal time, making their own schedules has come as a welcome surprise. Says Myrtle Potter, the former president of commerical operations at Genentech who is now running Chapman Development Group, a San Jose real estate company: "When you are in a corporate environment, there is a lot of machinery that can't be negotiated."

Certainly many of the women on our list are wealthier than most new entrepreneurs. A good number put some of their own capital to work starting their company. But doing so was not always an easy call. "You've worked 30 years and you are putting [that money] on the table," says Nina McLemore, 61, who founded Liz Claiborne's accessories business before starting her eponymous 20-employee, $7 million clothing company in New York. "It's a huge risk."

Even though many of these women had profit-and-loss experience, if they are typical of most executives, male and female, they may be less confident about managing a balance sheet and financing a business, says Stephanie Hanbury-Brown, founder of angel investing group Golden Seeds in New York. "Unless they were a cfo or an investment banker, they may have those issues," she says. McLemore, for one, says even though she ran a $165 million operation, she didn't have enough expertise in financing a startup. So she got an MBA from Columbia University—at age 50—and spent a few years running a private equity fund. "One of the things I tell women is they must learn corporate finance," says McLemore.

Some on our list contend that raising money is more difficult for women. "We had to beg people for money," Buivid says. She concedes that a consumer-products company such as hers is less favored by high-tech-happy investors, but she thinks she would have struggled less if she were a man. She recalls a venture capitalist posing the question: "I have no idea what this microdermabrasion product does, but can I use it to polish the tires on my car?" Says Buivid: "If there was a guy up there presenting on nanotechnology, do you think they would understand that technology? No. But no one would insult a man like that."

Terri Sebree, a former Abbott Laboratories executive, is now co-founder of Conshohocken (Pa.)-based NuPathe, an eight-employee pharmaceutical company developing a patch for delivering migraine medication. Sebree says investors have referred to her and her co-founder, also a woman, as "the girls." And one company made an offer for a licensing agreement that came with terms that were completely unfavorable to her company—an offer she says they wouldn't have made to a man. Says the 48-year-old: "When we stood up and said no, it shocked them."

But Sebree now feels at home in a startup. "You had to be conformist in how you dressed and how you acted," she says of her corporate days. "It was very proper, and I'm just not a proper person." Nancy Anderson, 59, ran a $1 billion business in Hewlett-Packard's computer systems division. But in 1990, when her son was two years old, Anderson decided her traveling days were over. She held a series of part-time management positions over the next decade, including interim CEO at a technology company. In 2005, she became CEO—and the eighth employee—of Palo Alto (Calif.)-based Blue Vector Systems, a technology company focused on radio frequency identification systems. "The product had been developed, but we didn't have any customers and there was no sales force," Anderson says. The company now has 30 employees. At hp, she says, she always wondered if the business would have gone on just fine without her. "But in a small company, it is more clear you make a difference," Anderson says. "And that's more fun."