Editor’s note: This article was first published in April 2013; its figures and status, including women entrepreneurs receiving 4.2% of venture capital funding and a Clayman Institute study still described as preliminary, are as of April 2013.
Women entrepreneurs are receiving only 4.2% of venture capital funding. That is why Stanford’s Clayman Institute is carrying out a study into the possible causes. Although the study is still at a preliminary stage, we can already start to draw some conclusions about what is happening.
As it happens, women, both in investing and in business, tend to be less “addicted to risk” (there are always exceptions) and tend to be more frugal with business expenses, but when an investor at a firm hears about entrepreneurs, the image that usually comes to mind is that of a man.
The study consisted of creating identical business plans and changing only the “gender” of the entrepreneur and their level of education (technical or non-technical). Investors were then asked to assess how likely they would be to invest in the project and to rate its level of risk.
The authors of the study found that the entrepreneur’s gender has a big impact on how investors react to the possibility of investing in the business.
For women, having a technical degree helped to “level the playing field” in terms of confidence compared with men who lacked one. A lack of technical knowledge, on the other hand, was a major disadvantage for women, whereas for men it did not matter much.
Andrea Davies Henderson attributes these results to the fact that the role of entrepreneur has historically been written as male, and that mindset still persists in investor circles. Perhaps, some time ago, an entrepreneur’s colour or nationality was also a disadvantage in circles of white investors, and that has changed over time.
For Andrea, women are just as competitive when it comes to starting a business as when it comes to running a company from a management position, so on the supposed playing field of business the scales are perfectly balanced between the two genders. Even so, the results the study shows so far suggest that, with equal technical education and entrepreneurial experience, women are at a clear disadvantage when it comes to raising private capital from these investment firms.
Further reading
- The painful and triumphant story of entrepreneur Ramona Pierson
- 7 crowdfunding platforms for entrepreneurs and investors
Featured image: King of Hearts, CC BY-SA 3.0, via Wikimedia Commons.
