Yahoo Finance The Sexism of Startup Land
Last year, an anonymous entrepreneur detailed on Forbes.com the many obstacles—and sometimes outright harassment—she faced when trying to raise money from venture capitalists while female. There were unwanted back massages and a pitch meeting at which she was asked, “Did your daddy give you money?”
It's not just the old guard doing the discriminating, she wrote:
Justin Mateen ... stated [allegedly] that having a young female cofounder at Tinder “makes the company seem like a joke” and “devalues” it. Or the comments of the male 20-something Twitter employee, who told me, “You should really hire a nerdy looking dude to represent your company publicly. You know, to make up for your looks.”
Women are now the majority of college students and about half of all managers in the broader workforce, but in the startup world, they number comparatively few. According to the Kauffman Foundation, they account for only about 16 percent of employers, and they make up only 10 percent of founders of so-called “high-growth” firms—startups that quickly add workers rather than fizzling out. Overall, women own only 36 percent of all small businesses.
The reasons for this disparity are hotly debated in the tech world. Some blame the stereotype that women are supposedly less tolerant of risk, or that they prioritize motherhood over the punishing hours of startup life.
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"They didn't know what to do with me."
Others point to the hyper-macho atmosphere of Silicon Valley and other venture hubs. Just this week, interim Reddit CEO Ellen Pao, a former junior partner at the investment firm Kleiner Perkins Caufield & Byers, testified in a lawsuit against her former employer that she was allegedly denied a promotion because of her gender. Among the issues involved are whether Pao's personality was deemed too "prickly" and why the company organized a men-only ski trip.
Lakshmi Balachandra, now a professor of entrepreneurship at Babson College, traversed this cultural divide when she worked at two venture capital firms—one mostly male, the other mostly female—in the late 90s. While at the male firm, occasionally entrepreneurs would assume she was an assistant, she said, or they would ask her out in the middle of meetings. But mostly, the firm's partners, "didn't know what to do with me. Like they were a little more formal," she said.
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"Did it feel like they were trying really hard not to be sexist?" I asked.
"Yeah," she said. "That's a perfect way to put it."
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One of the biggest reasons more women don’t start businesses is that female entrepreneurs have a more difficult time raising money. The Kauffman Foundation notes that, "For male entrepreneurs, 60 percent of startup funding was raised from outside sources, such as bank loans or angel investors, compared to 48 percent for women entrepreneurs. Women entrepreneurs are recipients of just 19 percent of angel funding and even less of venture capital funding.” A 2014 Babson College report similarly found that, although things are getting better, companies with a female CEO only received 3 percent of total venture capital dollars in the previous two years.
Fiona Murray, the associate dean of innovation at the MIT Sloan School of Management, recently conducted an experiment in which participants evaluated a video pitch from a new company that used slides, an identical script, and either a male or female voice-over. The male voice was 40 percent more likely to receive funding, as Murray wrote in the Boston Globe. “In a follow-up experiment, we found that evaluators particularly favor pitches from attractive men, and that attractive women do worse than unattractive men and women,” she added.
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"Evaluators particularly favor pitches from attractive men, and that attractive women do worse than unattractive men and women.”
Sarah Thebaud, an assistant professor of sociology at the University of California Santa Barbara, decided to try to determine why this gender gap in startup funding persists. In three experiments, she tested what a group of 178 college students thought about a series of business plans, and indirectly, the gender of the business owners behind them.
The study, published last month in the journal Social Forces, was conducted with two types of business plans: an “innovative” one and a “non-innovative” one. The non-innovative business was a new iteration of a model that’s been proven to work before (a typical wine store), while the innovative one presented an entirely new idea (a store that provides customers the ingredients, tools, and guidance to make and bottle their own wine.)
“Most businesses tend to replicate others that are similar—one pizza place may be a little different from another, but basically they’re all serving the same thing,” Thebaud explained in an article about the study in a UCSB publication. Thebaud presented the subjects with the same innovative and non-innovative business plans, but she manipulated the gender of the business owner, listing it as either Laura, Julie, David, or Jason.
The results suggest that investors are less likely to back female entrepreneurs because they don’t think they’re as smart as men are. The participants thought the non-innovative female business owner was less competent than the innovative one, but the level of ingenuity didn’t matter for the competence ratings of the male entrepreneurs. The non-innovative women were also rated as less competent than similarly run-of-the-mill men.
Thebaud tested other potential reasons the female entrepreneurs might have been discredited, like perceived likability or commitment, but they didn’t hold up.
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To Thebaud, the fact that the innovative women, but not men, had higher competence ratings than their less-innovative peers suggests that women who launch especially intriguing ventures—not just a pie shop, but a paleo pie shop—seem more “authentically entrepreneurial.” The risky nature of their businesses might broadcast these women's resemblance to men.
“It signals to people that she is, indeed, aggressive and outgoing, willing to take risks and push barriers, which is what people often think women might not be willing to do,” Thebaud said.
It's worth noting that on some platforms, such as Kickstarter, cash is more likely to flow to women than to men. Still, Thebaud's results are troubling: They suggest that female founders are at an overall fundraising disadvantage unless their ideas are mind-blowing While some startups are revolutionary, most are ordinary businesses that aren’t especially sexy but make their backers (and hopefully a handful of employees) some money. For every new Facebook, there are scores of boring, yet profitable, pizzerias or inventory-management software systems. Apparently, women aren't taken as seriously when they pitch them.
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Balachandra recently conducted a study that echoed Thebaud's findings. For her research, which is currently under review for publication, Balachandra examined how venture capitalists reacted to one-minute pitches from male and female startup founders in various industries. The main factor that determined whether the entrepreneurs were successful, she found, was how stereotypically "masculine" they behaved. The entrepreneurs—male and female—who were confident, stern, strong, and bold were much more likely to win funding for their ventures. The ones who were more stereotypically female, which to Balachandra's team meant they acted happier, kinder, and more excited, tended to lose. Importantly, there was no gender gap: The manly women performed better than the effeminate men did.
Balachandra thinks the explanation might lie in the fact that venture capitalists tend to invest in people who are similar to them—and all but 6 percent of VCs are men. Investors spend hours coaching their financial charges, so they might prioritize the type of fraternal chemistry that comes with interacting with someone of the same sex. "A VC will say, 'I only want to invest in someone I can have dinner with,'" Balachandra said.
What's more, female entrepreneurs often pitch businesses that appeal more to women than to men—and male VCs simply don't bother to try to understand them.
Balachandra says one solution is to breed more female venture capitalists—and keep existing ones from quitting. When she was working in the industry in the 90s, she started a networking group for fellow female investors in her area. None of the women in the group are still working in venture capital, she said.
And, she added, male investors need to do a better job finding the female entrepreneurs who are worthy of their time and money. Too often, male investors will rely on male-bonding type activities to pick their entrepreneurs, she says. "But you're assuming that just because you're sailing with someone that they're also going to be a good entrepreneur."
"[VCs] say 'women don't seek me out,' but a lot of women aren't in those circles," she explained. "You're not making an effort."
This article was originally published at http://www.theatlantic.com/business/archive/2015/03/the-sexism-of-startup-land/387184/?UTM_SOURCE=yahoo
