Say you want to open a new business. You have a great idea, an amazing pitch, and a flawless business plan. You decide to go see a group of venture capitalists to try and get funding. The same day, a man pitches his idea for a similar business. He’s around your age and is also quite qualified and well-prepared. They ask him about his five-year plan. They ask you about potential obstacles. He gets to talk about his brand vision; you are forced to defend your business model. When they discuss your meetings, they mention your good looks, but emphasize that he is a competent innovator. Unfortunately for you, he gets funding and you don’t. 

Why? You are a woman.

The National Women’s Business Council (NWBC) examined access to capital, finding that women in the US start companies with 50% less capital than their male counterparts. Why?  And what causes Swedish women to receive just 13%-18% of governmental venture funding when they own one third of businesses? Why do Swedish women own one third of businesses, but only receive 13%-18% of governmental venture funding? Recent research suggests that venture capitalists are biased towards male entrepreneurs and against female entrepreneurs. This is expressed even in the language used during meetings between venture capitalists from the Swedish government. Gender bias is prevalent in both questions asked to entrepreneurs and conversation among venture capitalists (VCs) as they privately evaluate pitches. The gender bias revealed in VCs’ rhetoric clearly correlates with the disparate funding received by men and women.

A Harvard Business Review study entitled “We Recorded VCs’ Conversations and Analyzed How Differently They Talk About Female Entrepreneurs” evaluated governmental venture capitalists’ private discussions following VC meetings with entrepreneurs to analyze their word choice, and the presence of gendered language.  Researchers ultimately found results exhibiting unequal treatment towards women entrepreneurs: the language was, indeed, gendered, and women were described as having lower entrepreneurial potential than comparable men. In a separate Harvard Business Review study from New York, “Male and Female Entrepreneurs Get Asked Different Questions by VCs – and It Affects How Much Funding They Get,” researchers investigated the types of questions that venture capitalists ask female and male entrepreneurs. They studied the ways that VCs frame questions and then found correlations between these question types and their unfortunate funding consequences:  biased questioning favors male entrepreneurs over females.

Malin Malmstrom, Jeaneth Johansson, and Joakim Wincent, the authors of the Swedish study, sat in on governmental venture capital decision-making meetings and found the clear and abundant “presence of gendered discourse”.  For example, male entrepreneurs were described as “[c]autious, sensible, and level-headed,” while female entrepreneurs were “[t]oo cautious” and unlikely to take risks. Concerning age, women were “young, but inexperienced” while men were “young and promising.” These findings are based on observed discussions between VCs to determine decisions for 125 applicants:  99 of whom were male and 26 of whom were female. The women were awarded, on average, 25% of the applied-for amount; while men received 52% of the applied-for amount. The researchers noticed a few disappointing trends in word choice by venture capitalists when discussing women. VCs “question [women’s] credibility, trustworthiness, experience, and knowledge” while describing male entrepreneurs as, “assertive, innovative, competent, experienced, knowledgeable, and having established networks” in the same situations. The men were not actually more experienced; all of the entrepreneurs were similarly qualified and their pitches were comparable. The only difference was the VCs’ gendered perception of the entrepreneurs.

In the United States, only 2% of all venture funding is given to women entrepreneurs, though they own 36% of US businesses, according to NWBC’s 2015 report, Access to Capital by High-Growth Women-Owned Businesses.” In a recently conducted US study, researchers observed question and answer sessions between venture capitalists (40% female) and entrepreneurs (12% female) at TechCrunch Disrupt New York, a startup funding competition. They determined that the men-owned startups received five times more funding than the women-owned startups. The researchers coded the Q&A sessions to see what kinds of questions were posed to the male and female entrepreneurs.

Researchers found that both female and male VCs would ask a man about the potential for gains, or “promotion-oriented” questions, such as “What major milestones do you look forward to in the next year?” while asking a woman about the potential for losses, or “prevention-oriented” questions, such as “What issues do you think will be problematic in the next year?”  A promotion oriented question focuses “on hopes, achievements, advancement, and ideals,” (“How do you plan to monetize this?”) while a prevention orientation is more “concerned with safety, responsibility, security, and vigilance,” (“How long will it take your to break even?”)  Results showed that “67% of the questions posed to male entrepreneurs were promotion-oriented, while 66% of those posed to female entrepreneurs were prevention-oriented.”  This distinction ultimately makes it significantly more difficult for female entrepreneurs to get funding.  When VCs’ implicit bias gets in the way, it completely explains the lack of funding for women.

Women own 31% of all privately-held firms in the United States, generate over $1.4 trillion in revenue, and make up over 50% of the population. Ignoring a group that is so numerous and influential—or allowing implicit bias against such a group to go unchecked—is detrimental to the economy because it will ultimately hurt everyone.

So, what can we do?

  • Entrepreneurs’ supporters should encourage unconscious bias trainings for all venture capitalists (not just men.) Since both female and male venture capitalists show implicit bias against women entrepreneurs, unconscious bias trainings can be implemented into VC culture and companies as a means to recognize and push against these biases.  “Stereotyping through language underpins the image of a man as a true entrepreneur while undermining the image of a woman as the same” however, by posing a balance of promotion and prevention questions to men and women, “investors grant all startups and equal chance to display their worthiness and may even improve their own decision making in the process”.
  • Women entrepreneurs pitching their ideas should be aware of this trend, and answer prevention questions with promotion answers. Groups like Women’s Business Centers or other entrepreneurial support groups could offer trainings or create online education modules to help women entrepreneurs learn how to handle this problem and foster an awareness of the issues, and their solutions. For example, if you are a woman business owner pitching an investor asked a prevention question like “Is it a defensible business wherein other people can’t come into the space to take share?” use a promotion answer such as “I see several opportunities for growth and few spaces for competition.” Then elaborate. Doing so may allow you to raise even more funds. The American researchers found that those who responded to prevention questions by using prevention would raise an average of $563,000 while those circumvented prevention questions in favor of promotion answers would raise an average of $7.9 million.

Now you take your superb business plan, mind-blowing pitch, and unique idea to a meeting with potential investors. Since you knew the kinds of questions they could ask ahead-of-time, you were able to prepare answers (promotion answers, not prevention!) This time, you walk out of the meeting confident and, most importantly, funded.


Author: Emma Hotra-Schubert is currently a Summer 2017 Fellow at the National Women’s Business Council and a ’18 student at Dickinson College in Carlisle, PA.