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ENTREPRENEURSHIP / MAR. 15, 2015
version 11, draft 11

How Women Entrepreneurs Are Rated As Less Investable

never trust a woman
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Starting a business is one of the most exciting things you can do, but also one of the most challenging. A recent study highlights how it is even more challenging for female entrepreneurs. The study explored whether we, as a society, are in fact systematically biased to regard male led businesses as better than female led ones, and why this might be the case.

See Also: The Woman Entrepreneur Who Turned a School Experiment into a Company

The study consisted of three experiments, all of which found that people tend to systematically discount the abilities and competence of women entrepreneurs. However, they also found that this bias can be watered down if the business is particularly new and unique.

"I looked at two different types of businesses, one in what I’d call a gender-balanced retail industry and the other in a high-tech industry," the author says.

Participants in the research were asked to rate various business plans for their particular attractiveness as an investment.  Each plan was identical, with the only difference being the gender of the entrepreneur pitching the venture.

"Most businesses tend to replicate others that are similar -- one pizza place may be a little different from another, but basically they’re all serving the same thing," the author explains. "For those types of businesses, I found the participants systematically rated women-led businesses to be less investment-worthy and less likely to be successful."

The Skills of Women

Interestingly, despite the evidence showing how girls do better at school than boys, female entrepreneurs were rated as less competent than their male peers. This bias emerged, regardless of the industry that was being explored, which is the main reason their projects were rated as less investable.

The only time this changed was when the business was really unique and innovative. When the business involved the introduction of a brand new idea or product, the bias against women was diluted considerably.  It emerged that female entrepreneurs with such an idea were rated as much more worthy of backing than their female peers with less innovative ideas, despite there being no such distinction with men.

The authors suggest that this difference is likely to be because when an innovative idea is pitched by a woman, they are showing off traits that society deems important in an entrepreneur, such as ambition, creativity and independence.

"When a woman starts a business, people are likely to question whether she has those traits. But when a woman introduces something particularly innovative, she is able to dispel those doubts, at least to some degree, because she appears to be more authentically entrepreneurial," the authors say.

Of course, this still tends to place women slightly behind their male counterparts, but the gap has at least shrunk a little, which may be a small comfort.

See Also: 5 Traits of Oprah Winfrey Entrepreneurs Should Make the Most of

The hope is that the research will shed light on just how entrepreneurs are evaluated by society, and we can, therefore, begin addressing this bias in the hope that more women will be attracted to entrepreneurship. And those female entrepreneurs that are already active might also stand a greater chance of their venture being treated on its merits.

Are you a woman that has started up her own business?  I’d love to hear about your experiences in the comments section below.

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