SAN FRANCISCO -- Although she had been steadily building her business since 1994, Nell Cote didn't really feel like a full-fledged entrepreneur until just a few months ago.
In April, her New York-based company, Hudson Williams, received the venture capital industry's seal of approval with its first round of funding -- a $3 million investment by Wheatley Partners that had almost as much psychological as fiscal impact.
''It's given me a lot of confidence and has validated my company,'' said Cote, whose 34-employee company helps businesses improve their Web sites. ''People may meet me and think, 'She's a woman,' but now they know I have venture capital behind me. It makes me more credible.''
Cote's experience remains a rare phenomenon for female entrepreneurs.
Even as venture capitalists shower billions of dollars on startup companies, only a trickle of the money is being invested in the estimated 9.1 million businesses owned by women.
About 38 percent of U.S. businesses are owned by women, yet just 2 percent of the money invested by venture capital firms goes to female-owned firms, according to a survey by the National Foundation for Women Business Owners and Wells Fargo & Co.
''Women business owners still tend to be invisible to venture capitalists,'' said Sharon Hadary, executive director for the foundation, a nonprofit research firm in Washington.
The survey indicates most female entrepreneurs are relying on their own savings and loans to finance their companies' growth instead of tapping into a rich vein of venture capital for cash infusions.
The trend uncovered by the foundation's survey means many female-owned businesses are being saddled with cumbersome debt that restricts their ability to grow. Meanwhile, venture capitalists may be missing out on golden opportunities being developed by female entrepreneurs who are unsure how to pitch their business ideas.
''We see this as a wake-up call for venture capital investors and women business owners,'' said Colleen Anderson, executive vice president of business banking for San Francisco-based Wells Fargo.
The reasons why women remain off venture capital's radar screen are varied, based on the survey and interviews with industry leaders and observers.
Some of the most commonly cited explanations include:
n Women aren't aggressively seeking venture capital. The survey found that just 11 percent of female-owned businesses are seeking venture capital.
''It can be intimidating,'' Cote said. ''Having venture capital makes you concentrate on an exit strategy and that can be difficult for a woman. We tend to fall in love with our businesses.''
n Women don't have enough inside connections to plug into the venture capital industry.
n Until recently, most women have been running staid businesses that offer little appeal to venture capitalists looking for fast-growing companies likely to make a killing in the stock market.
This is changing, though, as more women receive technical engineering degrees and others migrate from the telecommunications industry to start Internet-related companies.
n Although more women have entered the industry, men still dominate venture capital firms.
''There still aren't a lot of us wearing skirts in this industry,'' said Stacy Anderson, founder of Piedmont Venture Partners in Charlotte, N.C.
The foundation's survey found most women are lining up their venture capital from family and friends -- usually other women. Two-thirds of the women investors polled said they had bought stakes in female-owned firms in the previous three years compared with 40 percent of men investors.
''It's always easier to invest in organizations that look like you. That's human nature,'' Hadary said.
The survey results stem from interviews with 50 venture capital firms and 235 female-owned businesses. The foundation did not provide a margin of error.
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