Want to get your startup funded? New research says it helps to be male -- and good-looking.
A study recently published in the journal Proceedings of the National Academy of Sciences found that handsome men --much more than women or their less alluring male peers -- are significantly more likely to get venture capital funding for their startups. However much investors may think their decisions are solely based on the promise of an entrepreneur's pitch or the experience of its founding team, they may be just as susceptible to surface-level things as the rest of us are.
Numbers have long established that, until recently, less than 10 percent of venture capital deals go to businesses with women on the founding leadership team, says Fiona Murray, a professor at MIT and one of the authors of the study. One theory for why that happens is that women don’t come to venture capitalists as often for funding. But that's always been hard to test, she says, because VCs either say they don’t keep records of all the startups they reject or wouldn’t make them public.
The other rationale has been that women pitch different kinds of businesses, such as consumer goods, that may be of less interest to venture capitalists. Murray's study, therefore, was designed so the researchers might "imagine we could hold all that constant and see whether there’s something else going on," she says. In other words, what happens when you have the exact same business pitched in the exact same way?
Murray and her co-authors, professors at Harvard Business School and the University of Pennsylvania's Wharton School, designed their study to do just that. First, however, they looked at three real-world pitch competitions over the course of three years, in which angel investors judged entrepreneurs' business plans and awarded the most promising ones startup capital. Men were 60 percent more likely to get funded than the female entrepreneurs in the competitions. In addition, attractive male entrepreneurs were significantly more likely to be successful than their less handsome peers. Among the women, meanwhile, there was no significant variation in the attractiveness of those who won and those who did not.
It was possible, of course, that the types of businesses pitched by women in these real-world competitions were less appealing to the investors, or that the quality of the ideas by the men in these three competitions just happened to be better. So, the researchers created two lab studies to follow up their findings. In one, they showed participants two videos explaining actual business ideas for technology products in the veterinary medicine industry. The videos were identical other than that some were narrated by a woman, and in others, the script was read by a man. But even though the scripts and presentations were identical, 68 percent of the participants chose the presentation narrated by a man, rating them as more "persuasive, logical, and fact-based." (Participants were paid more if they picked the business plan that had been deemed more successful by a group of investors, so they were motivated to make a choice based on real potential.)
The researchers then went on to design a third study, similar to the second, in which the participants were shown the same videos. This time, however, there was a photo on the screen of the "entrepreneur," matched to whether a man or woman was doing the narration. Some participants saw images of men or women who had been deemed good-looking -- the images were pulled from a prior social psychology study that looked at attractiveness -- while others saw images of more homely men or women. Again, the researchers found that men were more likely to be chosen by the participants, and among the men, the attractive ones were significantly more likely to be chosen than the others.
Why did good-looking guys get funded so much more, both by professional and nonprofessional investors? Murray says it's because of the ingrained images we have of the people who typically hold these roles. "People have certain norms and expectations about high-tech innovation, and their expectations are that [the person running these companies] is male," she says. "But that only accounts for gender. People take the person they'd expect to see in that role, and then see the attractiveness. There's just a strong human bias toward that." In other words, the gender bias around the typical technology entrepreneur is so strong, Murray says, that it cancels out any difference investors might naturally favor in the attractiveness of female candidates.
As Murray and her colleagues expand their research, they intend to set up studies where the business ideas might better fit traditional gender norms about women-led businesses -- fair or unfair -- such as fashion or other consumer goods. This study, she says, involved a proposal for "what you might think of as a hardcore technology business. We wanted to pick something that was a fairly traditional thing eligible for venture capital."
Murray recognizes that the findings are unsettling, saying that "you almost feel like you’re being disloyal to women by publishing it." But, she hopes it will help the investment community recognize the issue more openly. "It's very uncomfortable to talk about by having conversation. We can only address our subconscious biases if we know they are there."