Gender bias (and more!) in venture funding decisions

A great paper was just published in PNAS, authored by researchers from Harvard Business School, Wharton School of Business, and MIT Sloan School of Management. It looks at some of the underlying reasons for the gender imbalance in venture funding.

They began by observing that women are severely under-represented in entrepreneurial activities: in the US, men engage in such activities at twice the rate of women. They also note that “among high-growth-potential ventures,  only 11% of US firms with venture-capital backing, past and present, have been founded or led by women, and women-led ventures have received only 7% of all venture funds.” This, of course, led them to ask why this would be so, and to review some past studies and opinions that have attributed the difference to personality attributes attributed to women versus those attributed to entrepreneurs, or to specific workplace biases that create impediments to women’s success such as increased skepticism about their abilities or fewer opportunities for career advancement.

There are lots of confounding factors in trying to study what’s happening here. For one, the data show that in aggregate men and women tend to focus on different types of market opportunities, with potentially different market size and growth opportunities. Also, because there are far fewer women entrepreneurs seeking venture funding, getting statistically significant sample sizes can be difficult. But a commonality is seeking venture funding is the “pitch” so the authors decided to focus on identifying whether there are any hidden biases in that process. Pitches have become fairly standardized, which also makes studying them easier.

The researchers began by looking at men’s and women’s success at “pitch competition” events over a three-year period, and found that men were 60% more likely to succeed in gaining funding than women. In addition, they looked at whether the physical attractiveness of the entrepreneur was a factor, and found that among men, attractiveness significantly increased their likelihood of getting funded. Among women, the difference was not statistically significant.

To recap:

  • Attractive men do the best.
  • Unattractive men do better than women.
  • Attractive and unattractive women fare the same.


As a follow-on study, they took several ideas for new businesses and wrote a 5-minute script with accompanying slides for each. They had VC’s evaluate the slides and written script and rate the venture’s likelihood of success so they could select pitches that were roughly equal in quality. They then asked study participants to watch a 5-minute video pitch, with the slides and an audio track of the script, spoken by either a male or female voice. Of importance: the script was exactly the same regardless of who was reading it. The study participants didn’t see any visuals of the speaker; they had only the slide visuals and the male or female voice.

Study participants, both male and female, dramatically favored a pitch with a male voice over the same pitch with a female voice.

As a third study, they tested the effects of physical attractiveness, by asking (a new set of) study participants to watch a single pitch video with slide visuals, either a male or female voice, and an accompanying still photo of the purported speaker. Again, they saw a clear preference for male speakers over female speakers, but they also saw a significant preference for pitches delivered by attractive males over unattractive males. Again, there was no statistically significant difference between pitches with attractive and unattractive women speakers. They also asked the study participants to rate the pitches on several qualities, and they found that the ones voiced by a male speaker were rated as more persuasive, logical, and fact-based than those voiced by a female speaker.

So here’s where the irony knob gets turned to 11. The meta-question that the researchers were really trying to get at was “Do investors make irrational decisions when deciding whether to fund entrepreneurs?” The study clearly shows that gender and male attractiveness are significant factors in their decisions. But, as the researchers point out, if women have systematic biases against them and extra impediments to their success at every step along the way to building a business (and they probably do) then it’s not irrational behavior to be less enthusiastic about funding them.  That doesn’t mean that their decisions are right, or ethical; it simply means that they might not be entirely irrational. Of course, there’s no evidence at this time that the funding decision bias is based upon a belief that women entrepreneurs will have a rougher time than their male counterparts, though the researchers might try to tease that out of a future study.

And the preference for attractive males over unattractive males bodes poorly for us nerds.


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