The company: The name of this fund gets right to the point. It wants a cutting-edge product or service, strong potential for growth -- and a woman in the front office.

Women must own a majority stake or be in top management with substantial equity in a company to get money from this investor. Women's Growth claims to be the largest small-business investment corporation (SBIC) exclusively focused on women-owned businesses. As an SBIC, it is licensed by the Small Business Administration and has access to funds borrowed from the government at favorable rates under an SBA guarantee. The 15-month-old fund, with $29 million in assets under management, has invested in several women-oriented Web sites and a network of physicians and is considering other types of ventures, including an organic soup company, a business that makes a home dry-cleaning product, and a marketing company. Women's Growth also practices what it preaches -- women are owners in the company and hold two of the three top positions.

The goal: Women's Growth has three managing partners -- Patty Abramson, Wendee Kanarek, and Rob Stein -- who developed the idea for the fund after reading about how difficult it was for women to get equity capital for their businesses. They explored channels for women entrepreneurs and found only four or five funds focusing on women-owned businesses, says Stein. Three of the funds targeted women and minorities and had financed only a few female entrepreneurs, says Stein. Yet, statistics show women are starting businesses at a faster rate than men, he says. So Abramson (the former owner of a communications and marketing company), Kanarek (who had been a banker and analyst), and Stein (an attorney and former senior official at the Commerce Dept.) joined forces, gathered women's business plans, and homed in on women needing $500,000 to $2.5 million. Most funds want to invest from $5 million to $10 million, so Women's Growth provided a perfect market niche, says Stein.

"We want a company that will be able to sell, go public, or make enough money to buy the investors out in three to five years," Stein says. Women's Growth has funded four companies in its 15-month existence. The firm will invest in ventures that have been in business as little as one year, but they must have sales and real products. Its other category is fast-growing, expansion-stage companies, in business two or more years, with clearly defined markets that are generating significant revenue.

Unlike a lender, Women's Growth is no passive investor. "Where we can, we stay very involved," Stein says. The company wants to have a representative on your board of directors, whenever possible, or "board visitation rights," says Stein.

The typical deal: Four-year-old Destiny Software, which began in a basement in the Philadelphia suburb of Conshohocken, didn't have a shot at lenders, so it took the venture-capital route. "It's hard for a young software company to borrow money, because it has no assets and can't borrow against equipment," says Lucinda Duncalfe, Destiny's chief executive. "We bootstrapped for a long time with one product and two clients." Destiny managed to snag Bank of America and First USA (now BancOne) as clients for its first product, Granite Foundation, which allows customers to do online business with banks. That market strategy -- to serve top-notch companies -- helped win the first round of funding. In March, 1997, Destiny raised $1 million from Blue Water Capital, a McLean (Va.) firm that gives seed money to startups. This took the company out of the basement, into commercial office space, and into the expansion phase.

In July, 1998, Destiny was ready for another round. By then, the software company had focused on its distribution network, added a product that allows issuers to deliver credit-card applications over the Internet, and had approximately 35 employees. "Destiny has established a track record and the ability to execute, so round two wasn't so tough," says Duncalfe. These strengths, and the fact that this was Duncalfe's third software startup, attracted the partners at Women's Growth, which invested $500,000. Two other parties invested to raise $2.5 million in total. So far, Destiny's financials look promising -- sales have shot to $2.5 million in 1998, up from $700,000 last year, Stein says.

The process: Women's Growth receives 30 business plans and an additional 50 inquiries each month.

The three partners weed out 70% of the business plans after an initial reading -- usually because they were sent too early, says Stein. Then, each month, the trio dissects the remaining plans until only three or four remain. The partners call each entrepreneur to learn more about her background, management team, revenue, sales for the next six months, and projects in the works. Women's Growth also inquires about marketing strategy, the size of the market, and competition.

The partners meet with their investment team every six weeks to discuss businesses that they are serious about. If Abramson, Kanarek, and Stein get a green light from its outside group of advisers, they negotiate a term sheet. "If the company agrees, we roll in the heavy artillery," Stein says, triggering a final round of close-up scrutiny.

What works: A woman who leaves a successful company to start the same business, but better, says Stein: "We look for a competitive advantage, like a proprietary product or service, someone who figured out the mousetrap better." To turn heads at Women's Growth, your company must be in an industry that has room to grow.

What doesn't: People who never built a company before or who are working in an industry they've never been in. Neither does a company that will take two, three, or four years to become profitable nor a product or service whose focus is not clear.

Parting advice: "Successful venture-backed companies have entrepreneurs who are passionate and committed to growing high quality and high growth," Stein says.

By Carlye Adler in New York

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