Diane Stafford: Why Do Women Get Such A Small Share Of Venture Capital?

By Diane Stafford
The Kansas City Star

WWR Article Summary (tl;dr) A new study which analyzed a popular pitch competition reveals that investors’ questions varied depending on whether a man or a woman made the pitch. The study concluded that bias in favor of male entrepreneurs was “deeply ingrained” and “essentially unconscious.”

The Kansas City Star

Women account for about 40 percent of founders of U.S. companies but get only 2 percent of the nation’s venture capital investments.

It’s long been proffered that women tend to start “lifestyle businesses” with lower growth paths and thus seek less money.

But an academic study to be presented in August at the annual Academy of Management conference suggests the funding disparity also lies in questions entrepreneurs are asked by potential investors.

Researchers at Columbia University and the University of Pennsylvania analyzed video footage of TechCrunch Disrupt startup funding competitions in New York from 2010 through 2016. That access, to a nationally representative funding contest, let them monitor interaction between funders and entrepreneurs who pitched their businesses.

The realization: Investors’ questions varied depending on whether a man or a woman made the pitch. The study concluded that bias in favor of male entrepreneurs was “deeply ingrained” and “essentially unconscious.” And they detected a male-favoring bias even when the venture capitalists were women.

The research paper’s title, “We Ask Men to Win and Women Not to Lose,” describes the findings. Researchers saw that questions to male entrepreneurs focused on their potential for business growth. Questions to women tended more toward asking for assurance of a safe return on investment.

The finding stunned Darcy Howe, managing director of the KCRise Fund, a venture capital group in Kansas City, Mo.
“My first reaction was to ask if I do that, and I’m a woman,” Howe said. “It’s a very unconscious thing. We need to ask ourselves if there’s anything in the way we ask questions or treat people, men or women, that we should change to model high expectations for everyone.”

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