Here are the stats:
In 2018, only 3% of venture capital in the U.S. went to companies with a female CEO.
All the while, the number of female-owned businesses has risen in the U.S.
Funds aren’t being allocated to the best investment opportunities, and some experts blame the pitch process. In fact, studies have shown that there is a strong gender bias in the pitch process. In one study, identical slides and scripts were used, voiced by men and women, and with or without photos of the presenter. The pitches using the voices by men significantly outperformed those with a woman’s voice and the pitches that used pictures of a good-looking man were by far the most successful. The researchers concluded, “investors prefer pitches presented by male entrepreneurs compared with pitches made by female entrepreneurs, even when the content of the pitch is the same.”
Further, women are questioned differently than men by potential investors. Men are asked more questions highlighting upside and potential gains, whereas women are asked more questions highlighting potential losses and risks.
Lastly, women undervalue themselves compared to men. Women come off as unsure of themselves, which is not a good look in a pitch. That said, the world needs more humility, and truth be told, the women who refuse to overinflate their odds are what VC needs right now. Especially in light of recent flops of several male founded ventures – I’m talking to you, WeWork, which failed to IPO at a heavy discount, Lyft, Uber, and Slack, all of which are down at least 20% from initial prices. Maybe the lesson here is that women need to stop being afraid to fail; after all, men do it all the time!
Harvard Business Review proposed some solutions:
Get rid of the pitch and rely on data, such as customer need, marketing skill, sales funnel, customer relationship management, and the leadership abilities of the founder. Surely, a woman will know the details of her business and be able to present a “just the facts, ma’am” approach to investors. I, for one, don’t need or appreciate a cocksure approach and I suspect, the way things are going, many others will feel the same way. Check out Clearbanc and Loyal VC. Each has its own methods of picking their “unicorns” but neither relies on the pitch and both have funded way more women than the average VC fund. Or, if a firm wants to keep the pitch, a workaround the gender bias implicit in the pitch could be to allocate buckets of money based on gender.
Check back next week for my blog post where I further explore how women can boost their confidence and show the world who’s boss!