According to a new study, businesses started by women receive less venture capital money than their male counterparts. Fiona Murray, who researches business innovation at MIT recently told NPR:
“Women-led businesses probably only receive between 5 and 10 percent of all the venture capital that’s allocated to startups in their very earliest in their growth phases.”
In order to get to the bottom of why this gap exists, she partnered up with colleagues at Harvard Business School to implement a study. There were three hypotheses:
- Women are simply not asking for funding or that business ideas produced by women don’t have as much potential for growth.
- Venture Capitalists are subconsciously biased against women.
- Women get less funding people society believe that they are worse investments. (harsh!)
The study was done using real startup pitches from actual companies. Each startup idea was presented in four different ways to see the impact of gender and attractiveness.
Venture Capitalists of both genders were then asked to decide which pitch they would rather invest in. The results showed that investors chose businesses presented by males 68% of the time. What’s even more interesting is that they found that attractive males had a huge leg up, according to Murray:
“People are most likely to find a pitch with a male voice with an image of an attractive man more appealing, more investable than a pitch by a less attractive man or woman. And the group that fares most poorly are actually the attractive women.”
Ready for the kicker? The study also found that these biases were true even when it was a female investor making the decision.
What’s more, they found the attractiveness of the male entrepreneur affected his success.
“There’s a very positive attractive-man effect,” says Murray. “People are most likely to find a pitch with a male voice with an image of an attractive man more appealing, more investable than a pitch by a less attractive man or woman. And the group that fares most poorly are actually the attractive women.”
What could be the reasons for this? One could immediately point to old gender stereotypes and biases, but in a past interview with NextShark, Cinnabon President Kat Cole offered an interesting perspective:
“…I often find that women chase perfection significantly more often than men. There are a lot of fun sayings around like “don’t let perfect be the enemy of good enough.” I was just reading an article in I think Ink or Fortune about how many of these startup entrepreneurs come in and the question to one of these VC guys was, “Who do you think makes a better entrepreneur, young women or young men?” He said, “You know the difference I think is often men will come in and just ask for insane things.” Like I want a hundred million dollars for this idea that has never even been put into practice because I so believe it’s going to exist. And many of the women come in and they say it has to be perfect before they even ask for anything, even something very small. The VC guy’s point of view says, “Hey I like both.” I think maybe going after the woman entrepreneur may be a little more of a sure bet but women tend to hold themselves back because they’re not going after those big things. They don’t want to let people down. They want to be confidently accomplished in their area and because of that, they sometimes let perfect be the enemy of good enough.”
Were you guys surprised by the results of this study? Make some noise in the comments below!