Do Venture Capitalists Show a Bias Against Women Entrepreneurs?

Previous studies have shown that for every dollar invested in startups with female founders in 2017, male-founded companies got $35. And fewer than 10 percent of U.S. venture capitalists are women. But do venture capitalists discriminate against women in the early stages of the funding process?

Researchers at Stanford University and the University of British Columbia created email pitches from fake startups offering a promising product or service, without overlapping too closely with existing companies. Feedback from professional investors helped the researchers select 50 strong pitches across industries like energy, healthcare, and information technology. The researchers verified that the company names were unique and created a basic website for each (the fact that all were “very early stage” would explain the lack of details).

Next, the researchers invented 200 founders, all graduate students at prestigious American universities and gave them names where their gender could reasonably be assumed. Randomly adjusting the senders’ names, the researchers then sent 80,000 cold pitches to 28,000 venture capitalists focused on U.S. startups. They received 3,000 replies showing interest in the proposals. The venture capitalists replied to proposals from women 8 percent more often than for proposals that were sent with male names.

“We were surprised to find bias in favor of female entrepreneurs at this initial stage of the investment pipeline,” said Ilya A. Strebulaev, a professor of finance at the Graduate School of Business at Stanford University and a co-author of the study. “That doesn’t mean there’s no discrimination against them overall — we know the pipeline is leaky, but we don’t know where.”

“In light of the substantial gender imbalance in real-world investment, one way to interpret our results is that a bias against female entrepreneurs materializes after the initial introductions, perhaps during in-person meetings,” Professor Strebulaev added.