Overcoming the Cupcake Challenge

Dec 15, 2010

No, the "cupcake challenge" is not an eating or cake decorating contest. The "cupcake challenge" refers to the challenge women entrepreneurs face when they have a "cute" business idea, such as a cupcake bakery or a line of baby bottles. Oftentimes, when these entrepreneurs go to the bank to get financing for their idea, they’re met with skepticism that their idea will be a viable business.

The cupcake challenge and access to financing was a major topic at yesterday’s Women in Business Forum at the U.S. Chamber. The forum, which was hosted by the National Chamber Foundation, brought together an inspiring group of women business owners and lawmakers, including Sen. Mary Landrieu (D-LA).

Landrieu pointed out that women business owners, like all business owners, struggle in the face of limited access to capital and credit. She told the story of Katherine Kallinis and Sophie LaMontage, co-owners of Georgetown Cupcake in Washington, D.C. The two sisters were turned down "by at least 10 banks," for a startup loan before financing their business themselves. Georgetown Cupcakes became an overnight sensation, with lines around the block, and a reality TV show on TLC. Finally, Eagle Bank’s Ron Paul stepped in and offered them a loan to recapitalize their business. Kallinis and LaMontage paid it off in six months.

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"Women start jobs. Men start empires," said serial entrepreneur and Georgia state lawmaker Stacey Abrams at the National Chamber Foundation’s Women in Business Forum on December 14.

Stacey Abrams, a Georgia state legislator and co-founder and chief operating officer of two start-up companies also faced "the cupcake challenge," when she and her partner Lara O'Connor Hodgson were seeking financing to launch Nourish Inc., a ready-to-serve baby bottle that comes with pre-measured purified water and a baby nipple top for moms-on-the-go. "Bankers would say, ‘well, it’s cute,’ but getting banks to understand the value of the product was difficult until we found a banker who had just had his own baby. He got it," Abrams said. Now the product is in 15 airports and expanding into Whole Foods markets.

As Sen. Landrieu said, we’ve got to get capital into the hands of enterprising young companies, even companies selling $3 cupcakes in a recession. You never know where the next great business idea is going to come from.

>> Watch an archived webcast of the event

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