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From today’s inbox:
Attractive female entrepreneurs are 16% more likely to receive start-up business investments from men, a new study from the University of St. Gallen has shown.
The study, developed by professors from the University of St Gallen with collaboration from the Universities of Zurich and Notre Dame, highlights how attractiveness to male investors can have a pivotal impact on investment decisions.
The research also revealed that the more attractive business founders were perceived, the more they were seen as being competent by male investors.
The world of business angels is male-dominated, which can lead to disadvantages for female start-up entrepreneurs in raising capital. For example, in the United States, women make up less than 19.5% of early-stage investors and there is less than 2% investment capital flowing into female-led start-ups.
We’ve not seen the paper yet so will have to go by the press office’s description, which outlines an experiment where 111 male early-stage investors are shown video of the same start-up business idea presented by a conventionally hot actresses and one who is more plain. To benchmark levels of stress and arousal, their cortisol and testosterone levels were measured and analysed before and after the pitches:
The resounding conclusion from the study was clear – attractive female entrepreneurs have a higher likelihood of receiving buy-in from male investors and were perceived as being the most competent in their role.
However, it was not only the perceived higher competence that correlated with more investments. Among the capital providers, the testosterone and cortisol levels during the pitch were also significantly higher for more attractive female founders, further increasing the likelihood of investment.
Psychologists will recognise this as the halo error (a cognitive bias whereby our perception of a person is shaped by our opinions of other traits) as applied to risk tolerance, which it proven to be vulnerable to stress and concupiscence.
The study does not touch on whether companies founded by attractive women are better investments, however. Maybe it’s a good strategy? Maybe the halo effect is an enduring competitive advantage when, for example, speaking to investors, regulators and media?
If anyone knows of any serious research along those lines, do let us know. In the meantime, here’s Robert Schreiber, a postdoctoral researcher at the University of St Gallen:
“It is now up to the venture capital scene to become aware of this challenge, and take appropriate measures to create a fairer and more balanced investment environment.”
And sure? But it’s also worth thinking about unintended consequences when investment from a male-dominated industry to female-led companies is already embarrassingly slight.
Just 2.1 per cent of VC dollars went towards all-female-founded companies in 2022, according to the Female Founders Fund. A 2017 study published in the Venture Capital journal found that all-male teams raising money were four times more likely to get it than teams with even one woman on them.
So maybe the solution is for VC companies is to hire fewer jerks?
Further reading:
— The subtle sexism of VC funding (Girlboss)
— How the VC pitch process is failing female entrepreneurs (Harvard Business Review)
— Addressing the gender imbalance in venture capital and entrepreneurship (CSIS)
— The casual sexism that women face when raising investment (Maddyness)
— The lack of VC funding to women is a Western societal shortfall (TechCrunch)
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