Startups led by women less likely to receive investments, study finds

SAN DIEGO — Female entrepreneurs and startups led by women often struggle to make it in Silicon Valley thanks to a pervasive nature of gender bias, a new study finds.

Researchers at UC San Diego closely examined nearly 18,000 startups listed on AngelList, a site that connects startups with angel investors, to help determine what was keeping industrious women, by and large, out of the tech world’s top ranks.

Woman in office doing paperwork
A new study finds that startups found or led by women are less likely to receive investments — or even as much an invitation to meet — by the male-dominated world of venture capitalists.

The data collected included the genders of each startup’s founders and prospective investors, along with the latter’s interest in funding the businesses.

Based on their dataset, the researchers found that male-led companies were twice as likely to be funded by male investors as those led by females, which presents a major issue, considering that 90 percent of venture capitalists are male.

Compounding matters, male investors were more likely to ask to meet a startup founder of their same gender, while also showing an increased willingness to share the company’s profile on social platforms.

The inequity of this gender gap can be summed up in a simple statistic: females made up 16 percent of founders on AngelList, but only comprised 13.5 percent of companies that received adequate funding.

Opposing the notion that women-led businesses were simply inferior was the finding that female venture capitalists actually invested more in the fairer sex, which led to a new inquiry.

“We wondered if maybe women investors are investing in women because they want to make money and help women,” says Michael Ewens, the study’s co-author, in a news release. “That would result in women-women pairings that underperform.”

For a fair assessment, the researchers looked at the portfolios of specific investors, posing the question, “When an investor funds a company founded by someone of their same gender, does the company perform differently than the same investor’s other investments?”

This analysis showed that male-founded startups wed to a male investor fared the worst when compared to any other gender pair (i.e., male-female, female-male, female-female).

Bias against female founders was found in yet another area analyzed by the researchers— namely, males who led companies whose offerings were “gender neutral” still received more funding than their female counterparts.

A final analysis tested for whether a woman’s supposed diminished tolerance for risk could lead to her either investing in a company or being invested in to a lesser degree. They found that female investors did not demonstrate a similar bias toward investing in male-run companies, dispelling any such notion.

Having eliminated all other possibilities, the researchers concluded that “taste-based discrimination” was the culprit, with many female founders experiencing blatant sexism.

For some male investors, however, it may simply be easier to identify with an entrepreneur who reminds them of themselves, they suggest.

Although it would be difficult to implement immediate regulations that could prevent such disparate outcomes, the researchers believe that change should— and can— be made.

“There’s no quick fix; however, if we continue to lower the barriers to becoming an investor, the pool of venture capitalists will begin to look more like the general population, and the gender gap will shrink,” Ewens concludes.

The study’s full findings can be found here.