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Research on high tech entrepreneurs finds that women founded only 3% of technology firms and 1% of high-tech firms between 2004 and 2007 (Robb and Coleman 2009). In addition, women entrepreneurs are less likely than men to acquire venture capital. An extensive study of high-tech entrepreneurs in 2001 reveals that only 5% of venture capital investments went to women-owned high-tech firms (Brush et al. 2001).
Why is this so? Is the pipeline of entrepreneurs with technical backgrounds the reason? Or does gender play a role in venture capital evaluations of entrepreneurs?
To understand the possible subtle biases that may impact venture capital funding of women entrepreneurs, the Clayman Institute conducted a study to test two hypotheses:
- Women are seen as less technically competent
- Women entrepreneurs need networks more than their male counterparts
We created identical executive summaries of a high-tech start-up seeking venture capital funding, and then changed only the gender and education for the "entrepreneur." Participants rated the venture's potential for success, impression of the entrepreneur, influence of social networks.
Female and male technical entrepreneurs were rated similarly - having technical degrees can level the playing field.
We also found that women non-technical entrepreneurs received significantly lower ratings than non-technical men. In fact, a non-technical degree can raise the ratings for male entrepreneurs, while they are detrimental to women.
For all women entrepreneurs, strong network ties are critical for success. Having strategic connections helps women entrepreneurs, more than men, when it comes to Venture Capital decision making.
Authors: Justine E. Tinkler, Manwai C. Ku, Kjersten Bunker Whittington, and Andrea Davies