Originally published on Advisor Perspectives
I’ve been doing research on gender discrimination. I wanted to learn more about how women fare in and outside the workplace.
I found compelling and troubling evidence that discrimination against women is more pervasive than I previously thought. It’s also subtle.
It was a wake-up call for me. I wanted to share it with you.
Venture capitalists are very smart and totally focused on the bottom line. I thought they would invest in any idea that held the potential for a big pay-off.
Why would they discriminate against women?
A disturbing article in the Harvard Business Review reached the conclusion that, indeed, they do.
It noted that female entrepreneurs owned 38% of the businesses in the U.S. Yet, they only receive 2% of venture funding.
The authors studied questions that were asked of 189 entrepreneurs (12% of whom were female) seeking funding from 140 venture capitalists (40% of whom were female).
Male-led start-ups raised five times more funding, on average, that those led by women.
Why the disparity?
Male and female entrepreneurs were asked different types of questions.
Men were asked about the potential for gains. Women were asked about the potential for losses.
Those biases persisted in questions asked by both male and female venture capitalists.
The researchers categorized the questions asked to men as “promotion-oriented” (hopes, achievements, advancement and ideals). Questions asked to women were “prevention-oriented” (safety, responsibility, security and vigilance).
The impact of being asked these different types of questions was insidious. Responses tended to match the orientation of the question, and reinforced the bias of the person asking the question. Promotion questions elicited aspirational, positive responses. Prevention questions elicited “a prevention answer.”
Since venture capitalists are looking for a huge payoff (and not just preserving their capital), those answering “promotion-oriented” questions were set up to give the type of response that resonated with venture capitalists.
A ray of hope
What was particularly depressing about the findings in this study was the bias against female entrepreneurs by both male and female venture capitalists. A female venture capitalist was just as likely as a male to frame prevention-oriented questions to a female seeking funding.
It’s doubtful this bias was conscious, which is what makes it daunting.
There is a ray of hope.
The study found those who gave a “promotion answer” to a prevention question significantly increased the likelihood of raising venture capital.
For example, assume a female entrepreneur is asked, “How long will it take you to break even?” A prevention response would be, “One year.”
A promotion answer to the same question would be, “Our projections show profits exceeding $ million at the end of our third year, with break-even being achieved at the end of year one.”
While this knowledge may be empowering, this sobering fact remains:
Solely by virtue of gender, women face obstacles their male counterparts don’t confront.
That’s sad and fundamentally wrong.