Analysis Shows Stark Differences in Critiques of Women and Men Entrepreneurs by Venture Capitalists

Image: WOC in Tech Chat

Although venture capitalists have the right to put their money where they please, it seems as if betting on women is still too much of a risk to take.

Harvard Business Review was granted access to listen and record conversations about who Swedish government venture capitalists (VCs) would give funding to and the results of the analysis aren’t so shocking.

Government venture funding is one of the most prevalent financial sources for entrepreneurship, which drives innovation and growth. Especially in Europe, where VCs gave approximately €3,621,000,000 towards growth in small and medium sized businesses from 2007 – 2013. When a bank decides to give someone a business loan, it’s based on the market potential of the product but when a VC is giving their funds to a company there can be more uncertainty, making their impression of the actual entrepreneur critical to their decision.

Women have always gotten the short end of the stick when it comes to venture to fund, receiving very little compared to men.

Bloomerberg conducted a study where they compiled a list of 890 startups that received funding between 2009 – 2015 and received at least $20M. Of the 2,005 founders on their list, just 7% were women who also only got $77 million for every $100 million a male-led company would receive, and the numbers are worse for women of color. With the average woman only making $.79 for a man’s dollar, it’s right in line with the current wage gap.

To be clear, Harvard Business Review wasn’t looking for gender discrimination practices when they sat in on these conversations, but it became very clear with more analysis of the research. The actual intent of the study was to help the Swedish VCs refine their decision-making process, but it only revealed what VCs really think of a woman-led company.

This particular instance consisted of 125 applicants, 99 of which were men and 26 women, The panel of VCs held two women and five men, with the analysis drawn from 36 hours of meetings and 210 transcribed pages.

Typically in Sweden, most government funding goes to male founders anyway with only 13-18% going to women-owned businesses. Surprisingly enough, government VCs are required to take into account national and European equality criteria and multiple gender requirements before making a final decision. 

venture capital for women
Image: Harvard Business Review

Some of the key differences in how men and women were viewed during these meetings include:

  • With the same experience and age, women were seen as having less entrepreneurial potential
  • Young men were seen as promising entrepreneurs while women were seen as inexperienced
  • Men were praised for being aggressive while women were viewed as emotional for their excitement

All of these differences played into who got funding, and how much they were awarded as well. Women were only given 25% of the initial amount requested, while male applicants received at least 52% of their requested amount of money. But that just applies to the women in this pool who actually received VC funding. According to the study, 53% of women were denied funding altogether while men suffered a rejection rate of 38%.

Women and men were also judged on different sets of criteria or characteristics. For example, when it came to a female applicant, her credibility, trustworthiness, and experience were the topics of discussion. For men, it came down to innovation, competence and the strength of their networks.

While most of us are aware of the lack of funding women in the U.S. and internationally receive to launch their ventures, we’re also reminded of how women are viewed in all scenarios. The stereotypes women face daily in their professions is only extended when they decide to work for themselves.  Although there are many examples of blatant sexism and gender discrimination, sometimes the most impactful forms are hidden and very subtle. The subtle ways in which the capabilities of women are diminished, affect the way both men and women portray women.

Since government venture capital is mean to use tax money to stimulate growth and create value for an entire society, gender bias presents the risk that the money isn’t being invested in businesses that have the highest potential, but individuals the VCs think have the highest potential.

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Walker's Legacy is a growing global women in business collective founded to establish networks of empowerment and access for women of color in business.