Why do women get such a small share of venture capital?

Women account for about 40 percent of founders of U.S. companies but get only 2 percent of the nation’s venture capital investments.

It’s long been proffered that women tend to start “lifestyle businesses” with lower growth paths and thus seek less money, but an academic study to be presented in August at the annual Academy of Management conference suggests the funding disparity also lies in questions entrepreneurs are asked by potential investors.

Researchers at Columbia University and the University of Pennsylvania analyzed video footage of TechCrunch Disrupt start-up funding competitions in New York from 2010 through 2016. That access, to a nationally representative funding contest, let them monitor interaction between funders and entrepreneurs who pitched their businesses.

The realization: Investors’ questions varied depending on whether a man or a woman made the pitch. The study concluded that bias in favor of male entrepreneurs was “deeply ingrained” and “essentially unconscious.” And they detected a male-favoring bias even when the venture capitalists were women.

The authors confirmed statistically that the TechCrunch Disrupt entrepreneurs came to the competitions with comparable funding needs. Yet the seven years of data showed that men raised an average of $17.1 million each, or 5.14 times the $3.3 million average raised by women-led startups.

Read more: Kansas City Star


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