How female entrepreneurs can respond to gender stereotypes

Published: 15 January 2020

Female entrepreneurs can be more successful in fundraising processes by anticipating and handling potentially biased responses to their pitches, according to a large-scale study led by Luleå University of Technology's professor Malin Malmström.

The new study, "How women can improve their venture pitch outcomes", by Malin Malmström, professor of entrepreneurship and innovation at Luleå University of Technology, Henrik Wesemann, a research associate at University of St. Gallen in Switzerland, and Joakim Wincent, professor of entrepreneurship and management at Hanken School of Economics in Finland, is published in prestigious MIT Sloan Management Review 

– It is very important emphasize that it is not the female entreprenurs who are the ones to fix the problem. Instead the change needs to take place by the venture capitalists. But when the structures look the way they do, there are certain things that can improve the odds for women seeking funding through venture capital. It's about gender neutralization, says Malin Malmström. 

Previous research at Luleå University of Technology about how public Swedish financiers perceive men and women seeking capital, has shown that female entrepreneurs on average received 25 percent of their demanded capital, while men gained more than half. In another study, researchers could show that venture capitalists adopt markedly different stereotypical notions of female and male entrepreneurs during their decision-making processes. But these notions are not supported by venture performance data from annual reports.

Real decision-making situations

In the new study the researchers have collected data from more than 200 real decision-making situations and the questions venture capitalists (VCs) raised when evaluating applications from entreprenurs in Sweden and the UK. The analysis is based upon VCs voicing their thoughts about the ventures they assessed and discussing their investment decisions. 

According to the researchers' conclusion, VCs evaluate male and female entrepreneurs by different standards. The more that men signal competitive aggressiveness and risk taking, the more promotion questions are raised in VCs’ minds. In contrast, the more women signal these sames kinds of entrepreneurial intensity, the more prevention questions are triggered in VCs’ minds. When more promotion questions are raised, VCs approve a larger share of the requested funding. And when more prevention questions are triggered, they approve a smaller share of the requested funding.

According to the new study, successful female entrepreneurs are aware of potentially biased responses to their pitches and take control of the conversation.

– It's not about manipulating the situation, it's about dealing with and reversing negative ideas, says Malin Malmström.

Keep focus on the idea's potential

The researchers have identified certain tactics that women can use in a pitch situation to keep their audiences engaged and confident of the idea's potential:

  • Avoid pitching a willingness to take risk. Such qualities only confer value to the communications of male entrepreneurs. Women who communicate the same willingness to take risks will pay for it in the prevention-dominated dialogue with the investor panel. 
  • Focus on promoting goals and upsides. Funders are more likely to invest in pitches that highlight the promotion of upsides, rather than the prevention of downsides. It’s important for women specifically to pay attention to the difference between promoting how they will advance their business goal instead of defending how they will prevent downsides.
  • Know the audience. All-male panels tend to put an even stronger focus on prevention than panels with a degree of female representation.

– This is the reality that women seeking funding must relate to. By being aware of obstacles and negative performances, you can navigate around them, says Malin Malmström.

 

Malin Malmström, Professor, Professor Entrepreneurship and innovation

Phone: +46 (0)920 491087
Organisation: Entrepreneurship and Innovation, Business Administration and Industrial Engineering, Department of Business Administration, Technology and Social Sciences

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