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Why Women Can't Raise Capital for their Businesses

It's well-known that women-owned companies receive only a tiny fraction of angel and venture capitalist money. The latest Angel Market Report, from the University of New Hampshire's Center for Venture Research, says women-owned ventures account about for 11% of angel funding. But whether it's because so few women seek VC dollars or there is rampant discrimination has been a matter of debate.

Now new research from the University of Utah lends weight to the argument that discrimination is at work. After studying the reactions of 222 MBA students to different founding teams, researchers Robert Wuebker and Lyda Bigelow found that even though the personal qualifications and the firm financials were identical no matter the gender of the CEO, women-led firms were seen as having a poorer strategic position, and female founders were perceived as less capable. The implication, says Bigelow, is that "women-led ventures, no matter how promising, are subject to more difficult financing environments. We did not expect to find such strong effects."

Female CEOs Offered Less Money
The researchers gave each student a packet of information about a fictitious technology company. The packet included an executive summary, detail about the company's top management, industry data, financial projections, and relevant news stories. The only differences were in the gender composition of the executive team.

Respondents were asked to assess the company's technology, growth prospects, strategy, potential for demand growth, level of risk involved, suggested amount of investment, and suggested CEO compensation, among other factors.

  • The recommended investment in the startup, as a percentage of its equity, was almost three times higher for firms with male CEOs
  • The students recommended that female CEOs, on average, be paid 86% of what a guy would get.
  • Strategic assessments of the firms' prospects (positioning, risk, uniqueness) were more favorable when the CEO was male
  • Top management teams led by female CEOs were seen as less likely to stay together during the startup's early years, as less cohesive, and as having more internal conflict
  • Both men and women evaluated people of their own sex more favorably, but this effect was stronger for men.
  • Men and women both discriminated against women CEOs, but men did so more strongly
Do actual investors evaluate with such bias? Next summer the researchers plan to repeat this study, asking venture capitalists to participate instead of students. They've already repeated the study with a small group of finance professionals, with similar results.
Do you think discrimination is a factor in investment and leadership decisions? Why, or why not?
photo courtesy Flickr user merci
Kimberly Weisul is a freelance editor, writer, and consultant. Follow her at
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