Female entrepreneurs pursuing innovative business ventures face a significant hurdle in securing funding due to unconscious bias exhibited by investors, as revealed by a study conducted by Northeastern University. The research draws upon an analysis of episodes of the popular television show “Shark Tank” to shed light on this issue.
Entrepreneurship thrives on novelty, but for women, this very characteristic becomes an unseen liability due to what the study terms the “double bind” effect. The researchers’ comprehensive findings stem from three distinct studies, encompassing an examination of “Shark Tank” episodes, as well as online and field experiments.
Unfair scrutiny
The unique aspect of the study lies in its analysis of the on-air dynamics between the entrepreneurs and the panel of celebrity venture capitalists known as the Sharks. By scrutinizing the Sharks’ spontaneous reactions and deliberate thought processes, the researchers were able to identify implicit biases that influenced their decision-making.
The study highlights a particular instance that exemplifies the implicit biases at play. It involves a female entrepreneur presenting a proposal for a “skinny mirror,” a mirror that reflects an individual as approximately five to 10 pounds lighter. Her intention was to market the product to clothing stores, aiming to facilitate increased sales.
However, she encountered a notably harsh comment from one of the Sharks. The Shark expressed vehement opposition, stating, “It’s supporting a falsehood…this is a lie to somebody…I deal with reality, will not be part of this sham…this is all crap. You are lying to people.”
These findings underscore the existence of unconscious biases exhibited by investors, which disadvantage women entrepreneurs seeking funding for their ventures. The study provides valuable insights into the challenges faced by female innovators, shedding light on the need to address and rectify these biases in order to foster a more inclusive and equitable entrepreneurial ecosystem.
A collective response
Addressing implicit biases against women should be a collective effort across the entire industry, focusing on rectifying systemic issues rather than placing the burden solely on women to navigate the funding landscape.
Recent data from PitchBook reveals that in the United States, startups led by all-women teams received a mere 1.9%, equivalent to approximately $4.5 billion, out of the total venture capital funding of around $238.3 billion. This percentage represents a decline from the 2.4% of funding secured by all-women teams in the previous year, as reported by TechCrunch.
The prevailing gender norms attributed to women, such as being polite, accommodating in group settings, and nurturing, may be perceived as incongruous with the qualities traditionally associated with successful entrepreneurship—leadership, boldness, and assertiveness.
While finding a clear solution remains challenging, studies suggest that women investors may also harbor biases against their female counterparts due to their firsthand understanding of the obstacles women face, potentially leading to harsher judgments. Merely increasing the number of women investors may not necessarily address the underlying issue.
However, the gender composition of investors can indeed play a role. Extensive research has explored the impact of homophily, whereby individuals tend to form connections with those who share similar gender backgrounds. Given the predominant presence of men in the venture capital industry, it is natural for male investors to forge stronger connections with male entrepreneurs. Consequently, a greater representation of women investors could prove beneficial by facilitating stronger bonds and support networks among women in the entrepreneurial ecosystem.
Effectively combating implicit biases against women in entrepreneurship necessitates a multifaceted approach that involves industry-wide collaboration, recognizing and rectifying systemic barriers, and fostering an environment that embraces diversity and inclusivity.
“Having more women may decrease the implicit biases, but fundamentally, we should fix the system; we should fix the overall occupational gender segregation and the industry role that the general public may have toward women as well,” the authors conclude.
