Women Raising Capital – Is There Bias?

Many women CEOs raising capital believe that bias against women exists. We know that 90% of VCs are male. Our calculations show that 80% of angel investors are men.  So bias, whether deliberate or unconscious, could be expected.

(Controversial) Question: Is there an actual bias against women entrepreneurs seeking investment?

Continue reading to see why I believe the actual answer in many cases is yes.  If you just look at broad averages, you might think the answer is no, but the averages are deceptive.  Looking at broad averages: Crunchbase data shows women CEOs raise capital at the same rates as men. Furthermore, if there is a female co-founder regardless of the gender of the CEO, such companies raise capital faster than when there is no female co-founder.  (This was unpublished research Intelliversity did.)  In fact, there may be a bias that favors women in the second position of COO or president (i.e. Execution Master) vs. being the CEO (Vision Master).  So, just looking at broad averages, you might think there is no bias.  But you know what they say:  "There are lies, damn lies and then there are statistics."

Keep in mind that each situation is unique - each individual is different. While, on average, there may not be bias, there can be individual bias case-by-case. Geography and industry type may foster such bias.  In other words, bias that occurs in individual cases, or in specific industries or regions, may be hidden by the statistics.

Cognitive diversity, the inclusion of people who have different styles of problem-solving and leadership, and who offer unique perspectives, is an essential factor in business success. The data shows that companies with cognitive diversity make better pivots.  They demonstrate the balance between overly stubborn and overly flexible. This success factor is a fact and not said for political correctness or confirmation bias. The faster the rate of change, the more this matters.

The bias of numbers. Remember, less than 10% of all deals seeking capital actually receive outside capital.  So it could be that some women blame their failure to raise capital on bias, whereas it may just be hard for anyone to raise capital.  But as you'll see below, common sense indicates that bias may really exist with any given investor.  Women founders must consider dealing with this potential bias upfront.  Before getting into how to deal with potential bias, let me detail the kinds of biases I've observed over the years.

Some biases I've seen:

  • Some investors may view a woman's relationship skills as a liability in the CEO position.  Many investors believe that great CEO founders have to be contrarian, (maybe even jerks - think Elon Musk) -- that is, willing to take controversial action regardless of how other people perceive them.  So investors may perceive a woman CEO as naturally too concerned about what others think of them vs. understanding the impact of the collaborative nature that women often bring to relationships.
  • Some investors in technical companies still think of women as not being technical, or not truly interested in the details of the technology.
  • Some investors may believe men to be more long-term goal-oriented than women.
  • Some investors may believe that women are not competitive enough to win in the hard-scruffle battle between companies.
  • Some investors may believe that women are not decisive enough to make the tough decisions (to fire someone, to make a risky investment, pivot, etc.)

What can women Vision Masters do to overcome these challenges?

First of all, if you're a woman investor seeking capital, and you believe me that there is sometimes bias, get angry about it, AND THEN, use that anger strategically; don't let it control you. A purely emotional reaction shuts down thinking and can close the opportunity to perfect your pitch. Redirect your anger toward fixing the problem in the most powerful way available:  your own actions.

1. Read the book Pitch Anything. As Oren Klaff states, be observant of the framing of your company and your vision as the "prize."  Never go into investor meetings with the mindset of a victim.  You are the one with the vision - you have the moral authority. If the investors disagree, move on.

2. Be aware of your own tendency to avoid fighting rejection, if it's true for you. In a study of over 10,000 business executives, the findings showed women were 1.5 times less likely to re-engage after experiencing rejection for high-level positions.  The same might hold for you when seeking capital.  

3.  Begin your pitch with personal stories (about you, your team, your typical client, and your ideal investor) to establish trust.  Establishing trust is covered extensively in many other blogs I've written for Intellivesity.

3. AND THEN, address the above biases while pitching.  Consider a humorously profane approach that suits your personality but calls out the "elephant" in the room.  Try to jar them, so they know you have the skills to succeed in every situation, so they know you have an "edge."  For example, a highly tech-oriented woman might say, "I know women are not seen as technical.  Well in my case, that's just not #@*! true."  This is unexpected, so it may be a powerful way to overcome the bias that you are too concerned about what others think of you.

Likewise, use similar statements regarding the other possible biases listed earlier.  Be creative.  Be humorous.  Be surprising. Be profane without being disrespectful.  Call out the elephant in the room. It will make you stand out in investors' minds. Trust me as a male investor, your gender makes no difference to an investor that is impressed with you, your team, and your company. That's the magic formula to win over even the most skeptical investor. Investors are looking to make money. If you are the real deal, you can shift your odds to being one of the 10% that gets funding.

In other words, don't be afraid to address each bias head-on.

And NEVER, never fall prey to the assumption that you're not getting funded because you are a woman. Will it happen? Yes.  Will it happen every time? No. On the other hand, savvy investors know the data that there is a lot of money to be made with women at the helm and as part of the C-Level team.  Often enough, a mix of humor and rebelliousness is enough to jar them back to reality.

So, improve your pitch in that way, stress your ability to pivot, and learn what you need to earn investors' trust, the most important funding factor. After all, as a woman, YOU have a bias working in the background for you all the time. Society as a rule, including male investors, see women as inherently more trustworthy.

P.S. This like every blog I write is controversial.  I was trained as a psychologist, specializing in organizational development, so I claim to have insight into human behavior.  If you disagree or want to discuss this, let me know.