Male and Female Entrepreneurs Face Different Questions from VCs — and It Impacts Their Funding
A groundbreaking study recently took place at TechCrunch Disrupt New York, and it unveiled a pretty significant bias when it comes to fundraising.
Despite women owning 38% of the businesses in the country and making significant contributions to the economy, female founders receive less than 2% of venture capital funding in the U.S.
What’s particularly intriguing is that even with the increase in the number of female VCs, rising from 3% to an estimated 7%, the funding gap keeps growing. This suggests a more deeply ingrained issue.
During the study, researchers looked at startups that were similar in terms of quality and capital needs, yet the total funding raised was significantly different. Male-led startups managed to raise five times more funding than their female-led counterparts.
So, what’s causing this substantial difference?
Well, it comes down to the kinds of questions that VCs ask male and female entrepreneurs. The study found that 67% of the questions asked to male entrepreneurs focus on the positive side of their business, like growth plans, monetization, and milestones. For example, questions might be, “How do you plan to make money with your business?” This encourages entrepreneurs to discuss their strategies for revenue and growth.
In contrast, 66% of the questions directed at female entrepreneurs are more cautious. They often revolve around risk management and the time it takes to break even. For instance, a prevention question might be, “How long will it take for your business to become profitable?” This type of question aims to understand an entrepreneur’s ability to handle risks and ensure the business’s financial sustainability in the early stages.
This difference in questioning sheds light on why funding outcomes can vary significantly. Founders who faced prevention-oriented questions received seven times less funding for their businesses.
However, there’s a glimmer of hope in this study. Entrepreneurs who adjust their responses to these questions can increase their likelihood of securing additional funding. How? By adopting a more optimistic view in their responses to investors, which includes emphasizing past accomplishments, articulating their vision for the future, and concentrating on solutions to challenges.
Recognizing this fundraising bias is the first step toward creating a more equitable entrepreneurial landscape. By having investors ask a combination of promotion and prevention questions to all entrepreneurs, regardless of gender, we provide every founder with an equal opportunity to thrive and succeed.
