Technical Background and Connections Are More Essential for the Success of Women Entrepreneurs than Male Entrepreneurs
4 min read · Dec 2024
Tinkler, Justine E., Kjersten Bunker Whittington, Manwai C. Ku, and Andrea Rees Davies.
“Women without technical backgrounds were evaluated as being less competent and as having less leadership ability and also received significantly less of a capital investment than technical women, technical men, and nontechnical men entrepreneurs. In addition, we found that a key factor in minimizing uncertainty – having a trusted social tie between the entrepreneur and the evaluator – is more important for evaluations of women than men.”
Women founders can overcome gender bias through a strong technical background and strong networks.
Summary
Venture capitalists (VCs) assess both the venture and the entrepreneur when making investment decisions. While tangible factors like technical expertise and work history contribute to the “supply-side” assessment, cultural biases and stereotypes influence the “demand-side” evaluation. This study shows that gender significantly impacts how entrepreneurs are perceived. Women without technical backgrounds are often stereotyped as less competent and with lower leadership potential compared to men without technical backgrounds. In contrast, women with technical skills can challenge these stereotypes to secure funding. Additionally, strong social connections and networks are more crucial for women than men in navigating the VC landscape.
Method
This paper employs a mixed-methods approach to investigate the interplay between entrepreneur gender, technical background (a technical degree and related work experience), and social capital (social ties to evaluators) in shaping funding outcomes. Qualitative exploratory research, including interviews and observations of industry professionals in Silicon Valley, provided insights into the VC decision-making process. Quantitative methods were used in a separate experiment study where a number of Stanford MBA students were randomly assigned to evaluate the entrepreneur and venture through the executive summary of a business plan for a mobile communications platform.
Key Findings
A technical background gives significant advantages to female entrepreneurs.
Female entrepreneurs are perceived as stronger leaders than their male peers with similar technical backgrounds and are more likely to secure higher average investment amounts.
Technical expertise has a more significant impact on female founders compared to their male counterparts when it comes to investors’ perceptions of leadership and competence.
Building strong relationships with VCs is more critical for women than men.
It is more important for women entrepreneurs to have strong social ties than men, regardless of technical background.
Investors favor technical expertise in both male and female founders.
Entrepreneurs with a technical background, regardless of gender, receive higher average investment amounts.
Female entrepreneurs without a technical background received the least investment from VCs.
Takeaways
The findings imply that women founders can overcome gender bias through a strong technical background and strong networks. This also means that women founders need to invest much more effort to “level the playing field” and prove their legitimacy as entrepreneurial leaders. For women entrepreneurs, regardless of their technical background, building connections with investors and supporting organizations that promote gender diversity in entrepreneurship can increase exposure to diverse perspectives and opportunities.
However, the onus should not be on women founders to bridge the gap—investors have a crucial role to play. Investors need to be aware of the implicit biases and stereotypes that may influence investment decisions and work to mitigate their own prejudices. Adopting standardized evaluation criteria that focus on the venture's potential and track record, rather than relying mainly on the entrepreneur's personal characteristics, can reduce the impact of gender bias.
While technical background is undoubtedly crucial in high-tech entrepreneurship, expanding our understanding of gender bias in venture capital decision-making is possible by examining broader factors. Beyond Silicon Valley, exploring how these biases manifest in different industries and regions can be enabled through greater data collection. This will support a deeper understanding of existing biases, equipping entrepreneurs and investors with strategies to address various preconceptions.
References
Tinkler, Justine E., Kjersten Bunker Whittington, Manwai C. Ku, and Andrea Rees Davies. 2015. “Gender and Venture Capital Decision-Making: The Effects of Technical Background and Social Capital on Entrepreneurial Evaluations.” Social Science Research 51: 1–16.
About WIN-VC Canada:
New Power Labs is the research lead of the Women and Nonbinary (W) Impact (I) Network (N) for Venture Capital (VC), a national collaborative of organizations working to provide services, programming, events, and dedicated resources to women and non-binary entrepreneurs and gender lens investors across Canada who are working towards becoming investment ready and increasing the pool of investors driven to invest in these ventures.
This research is part of WIN-VC Canada, supported by the Government of Canada. WIN-VC acknowledges the support of Innovation, Science and Economic Development (ISED). ISED has awarded funding for WIN-VC that will make the venture capital environment more inclusive for women by transforming traditional investment processes, processes and knowledge into respectful and meaningful approaches that value equity and impact with a focus on diverse women and non-binary entrepreneurs and SMEs including Black communities, Indigenous peoples, racialized populations, persons with a disability, 2SLGBTQ2+ and new Canadians.
