Investors Could Be Missing Out On Women-Led Startups. Here's How They Can Fix That – Forbes

Investors frequently say they want to diversify their portfolios. But they could be missing out on the next big femtech company because of the biased questions they ask entrepreneurs.
VCs question startups led by women and men differently — even when the ventures are otherwise comparable, according to a study from Columbia University and Harvard Business School that analyzed transcripts and video recordings from startup funding competitions with almost 200 companies from 2010 to 2016.
The different lines of questioning tend to put women on the defensive – a funding turnoff — while giving men opportunities to discuss their startup vision, which attracts more funding.
Ultimately, this hurts investors because they could be missing out on great ideas in rapidly growing industries such as femtech.
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Female founders are the driving forces behind startups that address maternal health, menstrual health, fertility, menopause and contraception, according to a McKinsey & Company report. On many metrics, women-led ventures outperform others led by men, Forbes reported.
The number of female-led ventures has increased drastically in just a few years. In 2021, women led 49% of newly created ventures — up from 28% in 2019, a Gusto study shows.
Researchers found that when women pitch new ventures, VCs tend to express concerns that they might fail, with questions like, “What safeguards do you have against that?” or “Are customers coming back?” But when men are pitching, VCs seem more interested in how they will grow and succeed, asking, for example, “Where do you want to get to if everything is fine?” or “How do you want to acquire customers?”
In other words, VCs’ questions typically put women in a position to defend their ventures – a stance that is generally unappealing to funders – but ask men to display vision and optimism, which attracts investments.
Who received more funding? Men. When investors asked primarily about growth, gain and aspirations, startups raised about 7.21 times more funds than startups that received questions focused on threats, potential losses and liabilities.
And it’s not just men who ask biased questions of founders; women are just as likely to question pitches from male and female founders the same way. In a different study from Sweden, Finland and Switzerland, researchers found the pattern was especially evident among entrepreneurs who signaled risk-taking and competitivity – a hallmark of an entrepreneurial mindset.
When VCs discussed the pitches of female entrepreneurs who came across as competitive risk-takers, the investors tended to express concerns about potential losses. But when VCs deliberated on the applications of male founders who were just as competitive, their discussions turned more to potential gains, not fear of losses.
How Investors Can Capitalize Equitably On The Most Promising Ventures
VCs that want to invest more equitably in the most promising ventures may find inspiration from orchestras. Using screens at auditions to visually separate candidates from juries helped increase the percentage of female musicians in major U.S. orchestras, according to a study by Harvard and Princeton economists. The screen makes it virtually impossible for the jury to know the sex of the candidate.
VCs could blind themselves to the startup founders by anonymizing written funding applications. Blinding pitch competitions may be harder, but curtains, video-conferencing tools and voice-changing apps may offer opportunities to do this creatively.
Awareness can also help change behaviors. VCs can become more aware of gender biases they may hold with free assessment tools like Project Implicit, which quantifies people’s biases by counting how long it takes them to pair stereotypically related and unrelated words. VCs can also check their written evaluations of startup funding decisions with tools that help detect biases in texts.
VCs could also apply interventions used by human resources professionals. Structured interviews – interviews that use the same set of predetermined questions for all candidates – are the gold standard for reducing biases in recruiting and interviews. VCs that want to avoid biased questioning may want to develop a set of scripted questions that they ask all start-up founders.
Though each venture may be unique, VCs could still use a checklist of sorts to balance questions that address growth, gain and aspirations with questions that address threats, potential losses and liabilities for all entrepreneurs.
By becoming more aware of their biases, blinding founders’ gender in funding applications and using a balanced set of questions, VCs should be more equipped to identify the next big startup led by a woman.

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