Another Entrepreneurship Project of the  Whitman School of Management at Syracuse University

Venture Capitalists: biased against women entrepreneurs?

            Academic studies have historically been unable to prove that claim, because of the small number of female entrepreneurs, and because, statistically, women do not tend to start businesses VCs want to invest in. However, a recent paper by Lisa Bigelow and Robert Wuebker, from the University of Utah, may prove that the bias does exist.

Indeed, for the purposes of their study, the researchers created a fictitious technology company seeking financing. They drafted a business plan, compiled industry and financial data, and submitted the very same information to different investors… except for one criterion: the gender of the founding team. Indeed, for some of the business plans, they assigned random male founders, and for the remainder, they assigned random female founders.

The researchers then proceeded to ask investors about CEO compensation, and found that their estimated compensation for female CEOs amounted only 86% of male CEOs’, for identical ventures; also, identical skills and abilities were judged more negatively when possessed by women. Moreover, for the same qualifications, men were assumed to have greater leadership, more industry experience, more general competence, and more dispute resolution skills.

The results of this study are interesting, and definitely seem to point towards a serious bias, since gender was the only difference in the investor packets. However, we must state that the study does have some limitations: investors in this case were MBA students who were aware of the fact that the business was fictive. A great follow up would be to conduct the same experiment on actual investors, to see if the bias persists.

For a more detailed explanation of the experiment, please visit http://smallbiztrends.com/2011/02/are-venture-capitalists-and-business-angels-biased-against-female-entrepreneurs.html

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