Investors Less Likely to Back Women-Led Ventures

Businesses trying to raise money by going public may have a tough time finding investors if a woman is at the helm, a new study shows.

Researchers at the University of Utah found that despite identical personal qualifications and firm financials, female founders and CEOs were perceived as less capable than their male counterparts. In turn, the initial public offerings for companies led by those women were considered less attractive investments.

"Bias against top-level female executives seems entrenched despite strides women have made in filling management positions within firms making their initial public offerings," said Lyda Bigelow, assistant professor at the University of Utah's David Eccles School of Business.

The study surveyed more than 200 second-year MBA students on their opinions of fictitious companies, some of which were led by men and some by women.  The results point out an apparent reluctance to invest in IPOs spearheaded by women even though nearly half of all privately held businesses in the United States today are owned, or led by, women.

The researchers said the lack of female-led IPOs suggests a potentially larger problem: a gender-based capital gap for new ventures.

[10 Business You Didn't Know Were Started by Women]

Similar to the glass ceiling of corporate America that limited the advancement of numerous female executives, women entrepreneurs face a "green ceiling" when it comes to financing, according to the study.

"If companies led by females are disadvantaged in their ability to raise cash through the stock market, it can impact the viability and financial health of their companies, their ability to expand and compete in an increasingly global and competitive environment, and, if they are unable to remain viable, their employees’ livelihoods," the researchers wrote.

The study, "Skirting the Issues: Evidence of Gender Bias in IPO Prospectus Evaluations," has been accepted for publication in a future edition of the Journal of Management. It was co-authored by Robert Wuebker, a postdoctoral fellow at the David Eccles School; Leif Lundmark, a doctoral candidate at the David Eccles School; and Judi McLean Parks, a professor of organizational behavior at Washington University’s Olin Business School.

Chad Brooks is a Chicago-based freelance business and technology writer who has worked in public relations and spent 10 years as a newspaper reporter. You can reach him at [e-mail] or follow him on Twitter @cbrooks76.

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Comments

[Anne ml]

07:58 AM on 06/18/2012

Love this!

[grass greener]

01:14 PM on 05/31/2012

The findings on this don't surprise me. Very good article, worth a thorough read.

[Gilbert Albright]

10:12 AM on 05/14/2012

It's because most of Women's entreprenurial ideas are stupid and and not well thought out. There has to be a market for what they are proposing. And most of their ideas aren't about anything new, it's just about decorating or adding color to something that already exists or "feminizing" an already existing product or service.

The fact is Women and not inventors, innovators or visionaries, which will limit the appeal of what they propose to investors.

[Marshmallow1001]

08:51 PM on 05/14/2012

All of that is sexist nonsense with no basis in reality. Also, it has nothing to do with the article.

The proposals and proposers were fictitious. There was a pool of fictitious businesses. Each business was randomly assigned with the name of either a fictitious male or female business person. The businesses and business people were equal in all respects except for the gender of the business person. Since the quality and non-gendered nature of the businesses were equal between men and women, the only explanation is gender bias.

This was an experiment, not a review of statistics. They controlled for bias regarding products and companies. Still, men were granted funding more than women.

[grass greener]

01:12 PM on 05/31/2012

This study was done in Utah - so not a surprise they came up with this bs. You from Utah, Gilbert?

[JackieSmith890]

05:49 AM on 05/11/2012

god i love these articles.

they use basic facts and research to prove that there is a sexist bias against women, without a doubt. and the usual male trolls come out to spew their nonsense in the comments section--of the women's forum of huffpost.

thanks for proving the point of the article, boys. get out of here. just like in real life, women don't care about what you have to say. get a job, preferably one involving manual labor, because that's wahat you were meant for.

leave.

[Dan Same]

08:41 PM on 05/11/2012

"“god i love these articles."

Yeh, of course, you do. You love seeing women portrayed as victims as it suits your extremist misandrist agenda.

"and the usual male trolls come out to spew their nonsense in the comments section--of the women's forum of huffpost."

Trolls? No, the only trolls are people like you. Men have every right to comment in the women's section, and if you don't like it, tough. As for spouting nonsense, you would be the expert on that.

"thanks for proving the point of the article, boys. get out of here."

Sorry, girl, but we aren't going anywhere. BTW, did you actually read the article? You have no idea what its point was.

"just like in real life, women don't care about what you have to say."

Is it fun being a misandrist extremist? Well, you're wrong. Just because nobody (male or female) cares what you have to say, doesn't mean that women don't care what men have to say. Unlike you, we have actually have intelligent things to say.

"get a job,"

Why don't you?

Do you know what a job is?

"preferably one involving manual labor, because that's wahat you were meant for."

Yet, another misandrist comment. Why don't you join the KKK? That's what you were meant for. Disgusting.

"leave.”

No. You leave.

[mallo]

06:37 AM on 05/12/2012

You're one of those trolls who has made arguing in online women's forums into his full-time job, so it's no surprise that you eagerly took jackiesmith's troll bait. HA HA. Seriously - you do this all day, right?
But back to the topic - Facts are facts, and the facts suggest that women are discriminated against. All of your dumb mra rhetoric and pathetic grandstanding and childish name-calling isn't gonna change reality.
Btw - she was OBVIOUSLY being sarcastic with the "that's what you were meant for" comment. See, it's funny, because usually, men prefer to tell women what they're "meant for". Get it? Sarcasm.

[Gilbert Albright]

10:20 AM on 05/14/2012

Here with go again, the old Women as victims claim. Hey the only thing investors care about is MONEY! If you present them with a proposal, idea or product that will make money, they don't care what gender you are or if you are a Zoo Animal.

The are plenty of Wealthy Females, so why don't Women go to them for financial backing? The fact is the results will be the same. NO interest is what they offer.

Women always resort to blaming Men for their failures and lack of success. Which is just a Cheap Shot to excuse their lack of business smarts, ability and competence. They seriously need to start looking in the mirror.

[JackieSmith890]

02:26 PM on 05/14/2012

telling the truth isn't playing the victim, dear. that's what you're doing as an irrational male.

investors do care about gender. they dismiss women because they're sexist pigs. and it's been proven. you simply can't deal with it because you're upset. and you clearly have no clue how venture capitalism works. so be quiet and stop embarassing yourself.

this is the women's section. your opinion isn't wanted or needed here. leave.

[KRAZYHORZE]

06:25 PM on 05/10/2012

Damn those men! creating facebook, google, cars etc., and leaving marketing and awareness groups for women to start. Who cares about merit, potential, utility, right feminist? Oh I have an idea, instead of just trying to get into the game and get the reward after all the heavy lifting is over (After facebook was created feminist are complaining there are not enough female board members) try to create industries, instead of just consuming reality tv and designer clothing.

[ResearchtheFacts]

11:29 AM on 05/10/2012

Nothing new until there are women lead boycotts of "boys only" products. More than 55% of social network users are women. That could command a huge pull if utilized the right way. They could drain pockets with that kind of power as protest of a seat at the table. First they need to stay away from Apple products which are making Wall Street richer.

As throughout history though there are some pioneering spirits Annie Oakley, Amelia Earhart and others who have kicked through doors and opened them for other women. At first women have to realize there is a problem, then object to it and exact remedy. Are we at the first stage?

[edtastic]

06:22 PM on 05/11/2012

Why would young women see a problem when their greatest challenge is finding a young man that is doing as well as their girlfriends? Females are the ones filling up the college campuses and graduate schools. Females are on average getting higher pay. Females are the leading group buying homes. You might want women to feel like under dogs but that won't work if they are not actually under dogs.

[Marshmallow1001]

06:29 AM on 05/12/2012

Females, aka women, aren't a greater percentage of college students, social networking site users (as if that's an accomplishment), or consumers because of a bias against men. Men have every bit as much opportunity to go to college, use facebook, and shop as women. Some of you men just aren't stepping up.

And - Women on average are getting higher pay?!?! That's just bait, right? You're just trying to get a reasonably rational, informed person with a slight temper to call you on your BS, right? All I'm going to say is PLEASE site your source. If this is true, the entire rest of the country would like to know about it.

AND - I'm more concerned with my job stability than finding a man. I'm a young woman. I just disproved your first sentence. Please retract it.

[MissTake1989]

05:08 AM on 05/10/2012

It must be nice to NEVER, EVER fail because of your own merits or lack thereof...

It's always the invisible enemy's fault.

Investors will invest in the most corrupt of third world govts. if they think they can turn a profit.

If they though that these women's investments would make money, they would invest...

End of story.

[mallo]

07:08 AM on 05/12/2012

It must be nice to NEVER, EVER fail because of your own merits or lack thereof...

It's always the invisible enemy's fault.

Did you even read the article? The investors in this study were asked to look at FICTICIOUS companies. Some of the FICTICIOUS companies were led by FICTICIOUS women; some were led by FICTICIOUS men. The students in the study percieved the woman -led ficticious companies to be riskier than those led by men. Get what I'm saying? This has nothing to do with merits, or lack thereof, but with the pre-concieved notions of investors. This is the ultimate evidence of discrimination.
The article also clearly says that half of all business in this country are led or owned by women (despite receiving less financial support) - so don't even try to suggest that women are somehow inferior business people. Try reading the article next time.

[NobleTry]

10:13 PM on 05/09/2012

So what's wrong with this? Money follows the surest investment potential.

[minto]

11:40 PM on 05/09/2012

What's wrong with your comment is that you are pretending that money follows something. The reality is that people, who have all sorts of different values and ideas, invest money in places that they think they will get a return on that investment. If people think that businesses led by men are a better investment, then more business led by men will get investment and more businesses led by men will succeed. Thus women have less of a chance to have businesses and if there is one thing we need in this country right now, it is every good business idea to have equal chance.

[MissTake1989]

05:10 AM on 05/10/2012

Except that there is no evidence that they SPECIFICALLY think that companies led by men are better.

In the example cited, they invested more in male companies.

Perhaps those companies offered better investments?

Just maybe...?

[NobleTry]

06:51 AM on 05/10/2012

I'll put aside your snide remark about me pretending.....

So it's a matter of fairness to you? Equal opportunity?

Not talent or experience or idea?

[Adamantoise]

09:19 PM on 05/09/2012

Lol, this is nonsense. Money respects no gender, race, religion, etc.

You really think an investor is going to pass up on a great business venture (see: US Dollars in profit) because it's started by a Woman?

I swear, is there any reasoning put into these articles anymore? A good idea is a good idea, and when a venture capitalist sees one they hop on it like a fat kid on cake.

Heck even Mark Zuckerberg had to go to his classmate to get funding for Facebook. Don't expect people to pour their money into an idea that they don't believe in.

But hey, you can always blame men for your problems if taking responsibility is too difficult.

[NobleTry]

10:11 PM on 05/09/2012

Yes, there are reasons investors don't go with women-owned businesses.

[Marshmallow1001]

06:48 AM on 05/12/2012

The idea isn't that investors consciously make decisions based on gender. They don't say "I like that idea, but I hate women, so I won't invest in it," or "I like that idea, but I'd like it better coming from a man," or any more subtle variation of that (though I'm sure this happens often enough, too). Most sexism is unintentional. People don't realize it, but almost all of us react differently to men and women. Our culture teaches us, for example, that women are not suited to working in business (which is untrue, sexist bull, and that's not up for debate). So, why would people invest in someone who they subconsciously assume would make a bad businessperson? That's the idea.

The author is informing us of a real-life phenomenon. Women are less likely to receive financial backing, and there must be a reason for this. Since the distinction being made is based on gender, it is overwhelmingly reasonable to draw the conclusion that misogyny is to blame. What do you think the reason is? And no one is "blaming men." Some of these misogynist investors are women, although men are way better at misogyny.

[mairs]

06:54 PM on 05/09/2012

This is data from a survey of 200 second-year MBA students? How about experienced, mature investors, and a larger survey?

[wonton]

11:48 PM on 05/09/2012

I agree. I think there is a bias there towards women, but this is not a very good study. The sample size is small and it's not a sampling of venture capitalists, but instead a sampling college students.

[Marshmallow1001]

07:35 AM on 05/12/2012

I don't think that indicates bias. The professional researchers have done this kind of thing before and know what their doing. Sure, in every study ever conducted a larger sample would give more precise results, but we should generally trust the researchers' methods. If they say that 200 is sufficient, it probably is. Especially when the information comes from an article that passed peer review in a subject that we ourselves don't have expertise in.

Also, the results would presumably be the same regardless of the experience of the student participants (I'm assuming when you say "investors" you meant the MBA students? The investors weren't intended to be inexperienced and young). The point is that all the participants were identical (or nearly so) in their age and experience. It doesn't matter if they're all young and green, or all old and experienced, as long as the researchers are controlling for the similar-ness of the participants.

[Marshmallow1001]

08:06 AM on 05/12/2012

Oops, sorry. I take that back. I was confused about who the students were, not you. But my point still applies.

[mairs]

10:39 AM on 05/12/2012

Point taken about sample size and uniformity, but "investors" are not 2nd year MBA students. The two groups might overlap. There may be someone who is already an investor who is getting an MBA, but one is not the other.

[waterlilidove]

06:07 PM on 05/09/2012

Ms. Romney has always known this. Men don't want to face competition from women. The only women succesful, old-fashioned, money lending men are even the slightest bit interested in seeing break through the glass ceiling are their won daughters.

[NobleTry]

10:12 PM on 05/09/2012

What competition from women?

[Brianna Cole]

12:49 AM on 05/10/2012

How about the 200 other applicants (75% of which were men) I beat out for Head Interpreter of an extremely (awesome) international company here in Japan when I was the 2nd youngest applicant with ZERO experience. With my limited experience now, I guarantee you I could open my own business and get all the financial backing I needed thank you. Luckily, I'm not up for running a company at 23. Don't count us out of the game just yet. Many of us are *just* starting to gain enough confidence to challenge the media roles.

[NobleTry]

07:02 AM on 05/10/2012

You had to work for it?

Just like everyone else....

[Salem1]

01:14 AM on 05/10/2012

?????!!!

What are you smokin'?