There are well known gender discrepancies in the VC world, with men far more likely to receive investment than women. A few years ago, research highlighted just how pervasive this level of discrimination is. The research was looking at the venture capital community to explore the kind of companies, and the kind of entrepreneurs that were getting backed financially.
Participants in the study, who were actual investors, were asked watch videos of people making a pitch, after which they were asked to rate each pitch for persuasiveness. They were also asked to rate how attractive they found the entrepreneur.
It emerged that the investors were significantly more likely to choose male entrepreneurs over their female peers, even if the content of the pitch was practically identical. And that wasn’t all. It also emerged that the prettier the entrepreneur, the more persuasive they were found to be. Providing they were male that is. Women could be as pretty, or as ugly, as they wanted, it made no difference.
Real world findings
A team from the Stanford Graduate School of Business were concerned about the experimental nature of such findings, and in new research set out to explore whether they are replicated in practice. They did so by sending around 80,000 emails pitching various fake startups to around 28,000 different venture capitalists and angel investors. The pitches were identical except for the names of the entrepreneurs behind the startup, which were designed to clearly indicate both the gender and ethnicity of the entrepreneur.
Surprisingly, the ‘entrepreneurs’ with female and Asian-sounding names received a higher proportion of positive replies than their male counterparts.
“We were surprised to find bias in favor of female and Asian entrepreneurs at this initial stage of the investment pipeline,” the researchers say. “That doesn’t mean there’s no discrimination against them overall—we know the pipeline is leaky, but we don’t know where.”
The researchers began by creating the pitches for the fake startups, with feedback from professional investors helping to hone the pitches of the 50 best ‘startups’. In total, the pitches covered industries ranging from healthcare to information technology, and the companies had names and websites to accompany them.
A few hundred founders were then invented for the startups, with all of the founders having attended prestigious American universities. The names were manipulated to clearly identify gender and ethnicity, before searching the web for each name to ensure that no real student existed that had attended the same university.
After randomly adjusting the names of the senders, some 80,000 cold pitches were sent to investors who have traditionally invested in American startups. Around 3,000 of these pitches received a reply signifying interest, usually either via phone call or a meeting to learn more.
An equal playing field?
Unlike in previous studies, the data showed that women were 8% more likely to get a reply than men, with entrepreneurs with Asian sounding surnames 6% more likely to hear back than those with white-sounding names. While the data doesn’t provide any conclusions as to why this is, the authors suggest that investors may be responding to perceptions about the abilities of various groups.
“Let’s say investors perceive it as more difficult for both Asians and women to enter graduate programs and found startups and assume they are more risk-averse. The investors may assume these individuals would only become founders if their idea was much better,” they say.
Of course, the study only explored the cold pitch stage, and there is a long way to go before investors part with their cash, so more research is needed to determine if the pipeline remains as strong for women and Asian entrepreneurs.
“In light of the substantial gender imbalance in real-world investment, one way to interpret our results is that a bias against female entrepreneurs materializes after the initial introductions, perhaps during in-person meetings,” the authors concede.
This was clearly shown in the study referenced at the start of this article, and the team plan to do more research to examine whether discrimination emerges further down the pipeline.
