Investors would probably like to think they decide which business pitches to put their money into by how good the idea is. But a new study finds they may also be persuaded by who does the pitching.
Researchers from Harvard, Massachusetts Institute of Technology, and the Wharton School examined three entrepreneurial pitch competitions along with two controlled experiments. “[W]e find that investors prefer entrepreneurial pitches presented by male entrepreneurs compared with pitches presented by female entrepreneurs, even when the content of the pitch is the same,” they write. Good looking men were particularly persuasive, although physical appearance didn’t make a difference for women. This leads to what the researchers identify as “a profound and consistent gender gap in entrepreneurship.”
Other studies have also reported that men are more likely to get investment than women. A paper found that business school students reviewing prospectuses from the same company with different CEO genders were four times more likely to recommend investing in the ones led by men.
The real life consequences of this kind of gender discrimination aren’t hard to find. Despite the fact that women start businesses at twice the rate of men, they are much less likely to get the financial backing that they need. Companies led by women raked in just 13 percent of all venture capital funding last year. Even that figure was an improvement, marking a record high and an increase from just 4 percent a decade ago. Women’s approval rate for getting small business loans is 8 percent lower than male-owned companies. Just 3 percent of the companies that went public between 1996 and 2013 — a sign of winning over enough investors to make that plunge — were led by women.
Women also struggle, of course, to rise to the top of established companies. They are less than 15 percent of CEOs at Fortune 500 companies and haven’t improved that figure in four years. Given that they face obstacles in starting their own businesses as well as running larger ones, there are few avenues for those who want to lead a company.