How VCs Talk About Men Vs. Women

by Lara Rutherford-Morrison

A new study by researchers in Scandinavia reveals that venture capitalists talk about male and female entrepreneurs differently, allowing common gender stereotypes to impact their perceptions of entrepreneurial potential. This stereotyping, embedded in the very language that venture capitalists (VCs) use to discuss investment proposals, impacts how funding is allocated to new businesses. This, in turn, exacerbates the already-existing gender imbalance among business owners.

In an article for the Harvard Business Review, Professors Malin Malmstrom, Jeaneth Johansson, and Joakim Wincent describe research they conducted from 2009 to 2010, observing a group of government VCs, composed of five men and two women, in Sweden. In that period, the researchers saw the VCs discuss 125 investment proposals for potential funding; 79 percent of those proposals were written by men, and 21 percent were written by women.

Malmstrom, Johansson, and Wincet closely analyzed how the VCs spoke about applicants and found that they used “radically different” language to describe male and female entrepreneurs. The researchers wrote that the language the VCs used to describe female entrepreneurs played into stereotypes about women that make them unfit for the business world (such as them being too cautious with money, or not being cautious enough). The “VCs question[ed] [female entrepreneurs'] credibility, trustworthiness, experience, and knowledge,” the researchers wrote.

In contrast, the VCs used language when discussing male entrepreneurs that sprung from stereotypes of men as bold leaders and strong business people — thus bolstering the VCs’ perceptions that these applicants were good candidates for funding. “Male entrepreneurs were commonly described as being assertive, innovative, competent, experienced, knowledgeable, and having established networks,” the researchers wrote.

Troublingly, even when the VCs detected similar qualities in the male and female entrepreneurs, they perceived those qualities differently according to gender. For example, men the VCs described as “young” were also described as “promising,” while women described as young were instead labeled “inexperienced.” Similarly, a “cautious” man was “sensible and level-headed,” while a “cautious” woman was deemed too cautious and not daring enough. The VCs also tended to comment more on women’s looks than those of their male counterparts.

In the study, published in Entrepreneurship: Theory and Practice, the researchers say this language dynamic reveals that, “in the venture capitalists’ view, the ideal entrepreneur is a man, not a woman.” These preconceptions — unconscious though they may be — seemed to impact how the VCs awarded funding. Men were more likely to receive financing than women; only 38 percent of men’s applications were denied outright, compared to 53 percent of women’s. Men were also given more money than women: On average, male applicants got 52 percent of their requested funding, while women only received 25 percent.

This discrepancy has a very real effect on the business and financial landscape. In Sweden, women own only a third of businesses. Male entrepreneurs receive the vast majority of government funding, with only 13 to 18 percent of funds going to female-led companies.

As Malmstrom, Johansson, and Wincet point out, the unconscious bias against female entrepreneurs — so strong that it makes its way into the very language people use to discuss investment proposals — is bad for everyone, not just women, because it clouds VCs’ ability to assess business ventures on their own merits. That means that great business ideas may be getting shuffled aside — simply because the entrepreneurs behind them are women.