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Harvard Research: VCs Still Prefer Investing In Men (And Attractive Males Fare Best)

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Not only do investors prefer male presenters, attractive males benefit most. While we have long known that the investment community favors male entrepreneurs (see this 2013 report by Contributor Peter Cohan), a new study from Harvard Business School shows the bias not only continues but in some respects is even worse than we’d thought.

"Women-led businesses probably only receive between 5% and 10% of all the venture capital that's allocated to startups in their very earliest in their growth phases," said Fiona Murray in an interview earlier this week with NPR. Murray researches business innovation at the Massachusetts Institute of Technology (MIT) and is one of the four primary researchers in the Harvard Business report.

The team examined several theories about why the funding gap still persists: Perhaps fewer women are asking for funding, or perhaps they are presenting ideas with less potential for growth. In the new research, the team examined genuine startup pitches from real companies.

Researchers presented each pitch in four ways to examine the effects of both gender and also attractiveness. Investors heard a pitch from a male voice paired with a photo of an attractive and then a less attractive male candidate. The same pitch was also presented in a female voice alongside pictures of women with different levels of attractiveness.

The team asked VCs of both genders to evaluate the effectiveness of the pitch and whether they’d want to invest.

The results: Investors chose businesses presented by males 68.3% of the time. Only 31.7% of investors chose to fund the ventures whose pitches were presented by females. Even more surprising: the more attractive male entrepreneurs fared best even when the women respondents were deciding where to invest. For women presenters, attractiveness was much less of an issue; however, the segment that fared worst (by a negligible margin) was attractive women.

Murray says these results are important to understanding our own biases.

Why is this? In the report, researchers note that across the broad landscape of entrepreneurial ventures, some prior research has determined that compared with men, women are likely to have fewer employees, lower growth projections, and lower levels of internationalization. However, conversely, recent research using a 15-year segment data from the 1,500 firms in Standard & Poor’s Financial Services suggests that female managers improve overall company performance by bringing informational and social diversity benefits to the management team, by enriching the behaviors exhibited by managers throughout the firm, and by motivating the lower-status women in their companies.

Another theory holds that male- and female-led ventures tend to focus on different kinds of market opportunities that map to different levels of growth—that male entrepreneurs tend to pursue ventures across a spectrum of industries, while women-led ventures pursue female interests such as fashion, cosmetics, and cooking.

One successful woman entrepreneur, speaking on condition of anonymity, noted that the investment community tends to be populated by older male investors who envision their investment prospects as protégés that allow them to serve the role of proud mentor to their entrepreneurial “sons.” An interesting perspective, although the current study shows that the gender bias against female founders exists for both women and men.

This is discouraging data; however, many successful women founders remain undeterred. For example, Rini Das, CEO of Columbus, Ohio-based PAKRA Games (providing SaaS-based software solutions for workplace performance analytics and games-based learning) visited with me about the issue of females and funding when she came to Salt Lake City to work with a Fortune-100 company, a major PAKRA account.

Rini Das. PAKRA, created her company without venture funds

By anyone’s estimation, Rini Das is a mover and shaker. She was born and raised in India and took her first paying job at age 15 by providing math tutoring for a 14-year-old girl. From there, she began a math tutoring business that helped to fund her graduate schooling as she completed an initial degree in Mathematics, followed by an MS in Applied Mathematics from University of Iowa and an MA in Economics from the State University of New York. She then conducted research in game-theoretic models of executive decision making for The Center for Operations and Econometrics in Louvain La Neuve in Belgium (which she accomplished without learning Flemish or French) while simultaneously fulfilling multiple phases of a successful managemnt consulting career.

When the funding community rebuffed her, Das bootstrapped her $20M company instead. Says Rini:  “I personally have many dimensions of diversity. If I had to worry about who/how/why I was treated differently, badly, unfairly, etc., I would not be able to get out of  bed. Although I have always spoken out against bad business behaviors that include 'exclusionary' and 'discriminatory' practices, I never allow those issues to deter or stop me from getting things done the right way.”

Well said.