Playing by the rules
How female entrepreneurs can get in the venture-capital game.
Entrepreneurs are serious players in today’s innovation economy, leaders who can generate wealth, create jobs, and transform the lives of customers and employees alike. And yet only a few women can be found among the entrepreneurial elite. When you examine the venture-capital money going to fund the Biogens and Akamais of tomorrow, only 7 percent is won by female entrepreneurs. Although it is true that fewer women overall found businesses — and those they create tend to be in industries that don’t appeal to venture capitalists (VCs) — research shows that other factors are at play.
Each time I organize panels for my students at the MIT Sloan School of Management, I listen as VCs list their investment criteria: market size, competitive advantage, customer need. But when pressed about the uncertainties inherent in their evaluation, the VCs inevitably fall back on their assessment of the company’s leaders. “I ask myself: Is this a person I want to have breakfast, lunch, and dinner with,” one man told the class. “Are they the first person I think about when I get up in the morning?” asked another. This approach struck me more like a search for a soul mate than for a financial investment. In this process, female entrepreneurs fare poorly.
With colleagues at Harvard Business School and The Wharton School, I recently conducted a study that involved video pitches for new companies that used slides, an identical script, and a voice-over from either a male or female “founder.” It turned out that companies pitched by men were about 40 percent more likely to receive funding than those led by women. In a follow-up experiment, we found that evaluators particularly favor pitches from attractive men, and that attractive women do worse than unattractive men and women.
This is no knock on VCs: The process by which they evaluate opportunities is disciplined, systematic, and rigorous. But let’s be clear: It is also social, cultural, and highly emotional — that is where biases can creep in. That’s bad for female entrepreneurs, and for investors who might be ignoring valuable opportunities.
What is to be done? Most of all, investors need to be more aware of their biases and follow the lead of those who champion female entrepreneurs. But I also believe there are things today’s brilliant and inspiring young women can do to increase their chances of getting VC funding.
1. WEAR A UNIFORM
I’ve watched hundreds of MBA students and engineering PhDs pitch investors. Men are rarely self-conscious about their clothes, while women (including me) agonize over what to wear or fiddle with dresses that don’t accommodate microphones. The difference? Men wear socially prescribed uniforms, such as tailored suits, khakis and button-downs, or skinny jeans and hipster sneakers. The men are comfortable and following social norms, which lets the audience focus on their words. Women need to follow suit. My plea to female entrepreneurs: Let’s pick a set of “uniforms” – distinctively female ones, not ones to ape our male colleagues. I am no fashionista and won’t suggest what they should be, but developing fashion norms for female entrepreneurs will help ensure that our ideas are the focus.
2. USE A CONFIDENT VOICE AND ASSERTIVE LANGUAGE
As crowd funding and online video pitching increase, attention spans are shortening. Research has shown that men typically come across as more self-confident in the first few minutes of their presentations. Their body language is assured and their voices are powerful. They say things like “I have a path-breaking approach that will solve one of the world’s biggest problems.” Women, on the other hand, often make self-deprecating jokes and don’t claim the full scale of their ideas. They say things like “Well, there’s this problem and I have an idea that tries to solve a piece of it.” Rehearse your pitches with special attention to where you put your arms, how you modulate your voice, and most of all how you begin.
3. NETWORK AS IF IT’S YOUR JOB
In fact, it is your job. Research shows women tend to have narrower social and professional networks than men. In another research project, my colleagues and I found that female academics were much less likely to serve on scientific advisory boards than their equally qualified male counterparts; the same was true for board of director membership. Our interviews suggest this is not because they are rejecting opportunities, but because they are much less likely to be invited to join. Coming into investor meetings with introductions, via strong professional ties, can win you time and attention.
4. WATCH SPORTS
How can young women connect with investors when their target (if Boston VCs are anything to go by) is male, mid-40s, married with two kids? This suggestion might seem frivolous, but here is my pragmatic view: Learn to talk sports if you can’t already. My colleague and assistant professor Catherine Turco has documented the role of sports in social bonding in the male-dominated private equity world. Talking sports creates a mutual social space and enables the VC to see how you think and form opinions in a different realm.
Success in the innovation economy can lead to power across many spheres of influence, as well as huge benefits for our society. But biases in early-stage venture investing may be getting in the way of the powerful good that entrepreneurship can provide. While paying attention to dress, voice, and sports may seem trivial, my research suggests that small things make a world of difference.
Fiona Murray is the Alvin J. Siteman Professor of Entrepreneurship at the MIT Sloan School of Management and associate dean for innovation and co-director of the MIT Innovation Initiative. Send comments to firstname.lastname@example.org.