Note: A slightly shorter version of this post appeared March 21, 2014 on PE Hub.
Oh lord, so this explains it.
Women have heard a million excuses about why, as entrepreneurs, we get the short end of the stick when it comes to raising venture capital. In case you are unaware or are missing a second X chromosome, you should know that “among high-growth-potential ventures, only 11% of US firms with venture-capital backing, past and present, have been founded or led by women, and women-led ventures have received only 7% of all venture funds.” Considering that about 51% of the US population is women and that there are loads of studies that demonstrate better financial returns from businesses run by women, this trend persists year after year.
Why? Why do men get all the funding?
We have been told that it is because it’s an “old boys club” and thus women are out of sight, out of mind.
We have been told there are so few female CEOs that that there are no opportunities to fund them.
We have been told that experience is key to successful leadership and women have less experience leading companies than men.
We have heard it is because women have babies and thus aren’t to be trusted as committed CEOs. (Note to readers who haven’t read the memo: women are largely unable to have babies without men involved).
We have heard it is because women are too self-effacing and present ourselves too self-consciously to be thought of as great leaders.
But a recent study published in the Proceedings of the National Academy of Science demonstrated pretty effectively that the main reason women come out badly on the venture capital funding front is that–wait for it–they are not good-looking men. Put another way, venture capitalists, who are overwhelmingly male, would rather fund a handsome guy than any woman, regardless of the female entrepreneur’s attractiveness quotient. In case it makes you feel any better, ugly men fared about as well as women. FYI, that does not make me feel any better.
This research finding suggests that “leaning in” will not solve female entrepreneurs’ funding challenges unless they lean into a sex change operation that leaves them looking like Justin Timberlake or George Clooney; your company is doomed if the surgery goes awry and you come out looking like Danny DeVito.
I know a lot of passionate and wildly committed women entrepreneurs, but I think that this is beyond the limits of even their endurance. And that is probably yet another reason they will be given for not collecting that financing check: if you really wanted it you would grow a pair. Literally. I cannot help but think about that Seinfeld episode “The Outing” that contributed the phrase, “…not that there’s anything wrong with that..” to the pop lexicon.
The study itself (which unfortunately you have to pay to view in it’s full text, but is nicely summarized for free HERE) demonstrated that after multiple tests, including having both men and women pitch the same exact deal to the usual suspects, the researchers, who come from such questionable MBA schools as Harvard, UPenn/Wharton, and MIT/Sloan, came to this conclusion:“Entrepreneurship is a central path to job creation, economic growth, and prosperity. In the earliest stages of start-up business creation, the matching of entrepreneurial ventures to investors is critically important. The entrepreneur’s business proposition and previous experience are regarded as the main criteria for investment decisions. Our research, however, documents other critical criteria that investors use to make these decisions: the gender and physical attractiveness of the entrepreneurs themselves. Across a field setting (three entrepreneurial pitch competitions in the United States) and two experiments, we identify a profound and consistent gender gap in entrepreneur persuasiveness. Investors prefer pitches presented by male entrepreneurs compared with pitches made by female entrepreneurs, even when the content of the pitch is the same. This effect is moderated by male physical attractiveness: attractive males were particularly persuasive, whereas physical attractiveness did not matter among female entrepreneurs.”
The researchers specifically found that when identical business-plan videos were narrated by either male or female voices; respondents chose the plans narrated by men 68% of the time and that “in pitch competitions, male entrepreneurs are 60% more likely than women to succeed, other things being equal; the study finds that gender explains 42% of this variance. Meanwhile, physical attractiveness, as rated by those viewing pitches, produces a 36% increase in pitch success.”
As I sit here on the couch tonight watching my favorite show on TV, I realize there is an obvious solution to this problem. When VCs hear pitches or judge pitch competitions, they should do it in the manner of The Voice. In other words, VCs should listen to these pitches with their back turned towards the entrepreneur and, to add another level-setting artifice, with voice alteration technology applied to de-genderize the talk track. I would love to see a study that tries this—that actually takes the obvious gender and hotness cues out of the way and lets the deals and founders stand on their own.
Who knows? Maybe some of the VCs might find they like women after all.