This is me at five years old, shortly before jumping into this beautifully still pool of water. I soon find out the hard way that this pool is completely empty because the ice-cold water is near freezing and literally takes my breath away. Even though I already know how to swim, I can't get up to the water's surface, no matter how hard I try. That's the last thing I remember trying to do before blacking out. Turns out, the lifeguard on duty had been chatting with two girls when I jumped in, and I was soon underwater, so he couldn't actually see or hear me struggle. I was eventually saved by a girl walking near the pool who happened to look down and see me. The next thing I know, I'm getting mouth-to-mouth and being rushed to the hospital to determine the extent of my brain loss. If I had been flailing at the water's surface, the lifeguard would have noticed and come to save me. I share this near-death experience because it illustrates how dangerous things are when they're just beneath the surface.
Today, I study implicit gender bias in start-ups, which I consider to be far more insidious than mere overt bias for this very same reason. When we see or hear an investor behaving inappropriately towards an entrepreneur, we're aware of the problem and at least have a chance to do something about it. But what if there are subtle differences in the interactions between investors and entrepreneurs that can affect their outcomes, differences that we're not conscious of, that we can't directly see or hear?
Before studying start-ups at Columbia Business School, I spent five years running and raising money for my own start-up. I remember constantly racing around to meet with prospective investors while trying to manage my actual business. At one point I joked that I had reluctantly pitched each and every family member, friend, colleague, angel investor and VC this side of the Mississippi. Well, in the process of speaking to all these investors, I noticed something interesting was happening. I was getting asked a very different set of questions than my male cofounder. I got asked just about everything that could go wrong with the venture to induce investor losses, while my male cofounder was asked about our venture's home run potential to maximize investor gains, essentially everything that could go right with the venture. He got asked how many new customers we were going to bring on, while I got asked how we were going to hang on to the ones we already had. Well, as the CEO of the company, I found this to be rather odd. In fact, I felt like I was taking crazy pills. But I eventually rationalized it by thinking, maybe this has to do with how I'm presenting myself, or it's something simply unique to my start-up.
Well, years later I made the difficult decision to leave my start-up so I could pursue a lifelong dream of getting my PhD. It was at Columbia that I learned about a social psychological theory originated by Professor Tory Higgins called "regulatory focus," which differentiates between two distinct motivational orientations of promotion and prevention. A promotion focus is concerned with gains and emphasizes hopes, accomplishments and advancement needs, while a prevention focus is concerned with losses and emphasizes safety, responsibility and security needs. Since the best-case scenario for a prevention focus is to simply maintain the status quo, this has us treading water just to stay afloat, while a promotion focus instead has us swimming in the right direction. It's just a matter of how far we can advance.
Well, I had my very own eureka moment when it dawned on me that this concept of promotion sounded a lot like the questions posed to my male cofounder, while prevention resembled those questions asked of me. As an entrepreneurship scholar, I started digging into the research on start-up financing and discovered there's an enormous gap between the amount of funds that male and female founders raise. Although women found 38 percent of US companies, they only get two percent of the venture funding. I got to thinking: what if this funding gap is not due to any fundamental difference in the businesses started by men and women? What if women get less funding than men due to a simple difference in the questions that they get asked? After all, when it comes to venture funding, entrepreneurs need to convince investors of their start-up's home run potential. It's not enough to merely demonstrate you're not going to lose your investors' money. So it makes sense that women would be getting less funding than men if they're engaging in prevention as opposed to promotion-oriented dialogues.
Well, I got the chance to test this hypothesis on companies with similar quality and funding needs across all years at the funding competition known as TechCrunch Disrupt Startup Battlefield has run in New York City since its inception in 2010. TechCrunch is widely regarded as the ideal place for start-ups to launch, with participants including start-ups that have since become household names, like Dropbox, Fitbit and Mint, presenting to some of the world's most prominent VCs. Well, despite the comparability of companies in my sample, male-led start-ups went on to raise five times as much funding as the female-led ones. This made me especially curious to see what's driving this gender disparity.
Well, it took a while, but I got my hands on all the videos of both the pitches and the Q and A sessions from TechCrunch, and I had them transcribed. I first analyzed the transcripts by loading a dictionary of regulatory-focused terms into the Linguistic Inquiry and Word Count software called LIWC. This LIWC software generated the frequencies of promotion and prevention words in the transcribed text. As a second method, I had each of the questions and answers manually coded by the Tory Higgins Research Lab at Columbia. Regardless of the topic at hand, an intention can be framed in promotion or prevention. Let's take that topic of customers I mentioned briefly earlier. A promotion-coded question sounds like, "How many new customers do you plan to acquire this year?" while a prevention-coded one sounds like, "How do you plan to retain your existing customers?" During the same time, I also gathered background information on the start-ups and entrepreneurs that can affect their funding outcomes, like the start-up's age, quality and funding needs and the entrepreneur's past experience, so I could use these data points as controls in my analysis.
Well, the very first thing that I found is that there's no difference in the way entrepreneurs present their companies. In other words, both male and female entrepreneurs use similar degrees of promotion and prevention language in their actual pitches. So having ruled out this difference on the entrepreneur's side, I then moved on to the investor's side, analyzing the six minutes of Q&A sessions that entrepreneurs engaged in with the VCs after pitching. When examining the nearly 2,000 questions and corresponding answers in these exchanges, both of my methods showed significant support for the fact that male entrepreneurs get asked promotion questions and female entrepreneurs get asked prevention questions. In fact, a whopping 67 percent of the questions posed to male entrepreneurs were promotion-focused, while 66 percent of those posed to female entrepreneurs were prevention-focused. What's especially interesting is that I expected female VCs to behave similarly to male VCs.
Given its prevalence in the popular media and the venture-funding literature, I expected the birds-of-a-feather theory of homophily to hold here, meaning that male VCs would favor male entrepreneurs with promotion questions and female VCs would do the same for female entrepreneurs. But instead, all VCs displayed the same implicit gender bias manifested in the regulatory focus of the questions they posed to male versus female candidates. So female VCs asked male entrepreneurs promotion questions and then turned around and asked female entrepreneurs prevention questions just like the male VCs did.
So given the fact that both male and female VCs are displaying this implicit gender bias, what effect, if any, does this have on start-up funding outcomes? My research shows it has a significant effect. The regulatory focus of investor questions not only predicted how well the start-ups would perform at the TechCrunch Disrupt competitions but also how much funding the start-ups went on to raise in the open market. Those start-ups who were asked predominantly promotion questions went on to raise seven times as much funding as those asked prevention questions. But I didn't stop there. I then moved on to analyze entrepreneurs' responses to those questions, and I found that entrepreneurs are apt to respond in kind to the questions they get, meaning a promotion question begets a promotion response and a prevention question begets a prevention response. Now, this might make intuitive sense to all of us here, but it has some unfortunate consequences in this context of venture funding. So what ends up happening is that a male entrepreneur gets asked a promotion question, granting him the luxury to reinforce his association with the favorable domain of gains by responding in kind, while a female entrepreneur gets asked a prevention question and inadvertently aggravates her association with the unfavorable domain of losses by doing so. These responses then trigger venture capitalists' subsequent biased questions, and the questions and answers collectively fuel a cycle of bias that merely perpetuates the gender disparity. Pretty depressing stuff, right?
Well, fortunately, there's a silver lining to my findings. Those plucky entrepreneurs who managed to switch focus by responding to prevention questions with promotion answers went on to raise 14 times more funding than those who responded to prevention questions with prevention answers.
So what this means is that if you're asked a question about defending your start-up's market share, you'd be better served to frame your response around the size and growth potential of the overall pie as opposed to how you merely plan to protect your sliver of that pie. So if I get asked this question, I would say, "We're playing in such a large and fast-growing market that's bound to attract new entrants. We plan to take increasing share in this market by leveraging our start-up's unique assets." I've thus subtly redirected this dialogue into the favorable domain of gains.
Now, these results are quite compelling among start-ups that launched at TechCrunch but field data can merely tell us that there's a correlational relationship between regulatory focus and funding. So I sought to see whether this difference in regulatory focus can actually cause funding outcomes by running a controlled experiment on both angel investors and ordinary people. Simulating the TechCrunch Disrupt environment, I had participants listen to four six-minute audio files of 10 question-and-answer exchanges that were manipulated for promotion and prevention language, and then asked them to allocate a sum of funding to each venture as they saw fit.
Well, my experimental results reinforced my findings from the field. Those scenarios where entrepreneurs were asked promotion questions received twice the funding allocations of those where entrepreneurs were asked prevention questions. What's especially promising is the fact that those scenarios where entrepreneurs switched as opposed to matched focus when they received prevention questions received significantly more funding from both sets of participants.
So to my female entrepreneurs out there, here are a couple simple things you could do. The first is to recognize the question you're being asked. Are you getting a prevention question? If this is the case, answer the question at hand by all means, but merely frame your response in promotion in an effort to garner higher amounts of funding for your start-ups.
The unfortunate reality, though, is that both men and women evaluating start-ups display the same implicit gender bias in their questioning, inadvertently favoring male entrepreneurs over female ones. So to my investors out there, I would offer that you have an opportunity here to approach Q&A sessions more even-handedly, not just so that you could do the right thing, but so that you can improve the quality of your decision making. By flashing the same light on every start-up's potential for gains and losses, you enable all deserving start-ups to shine and you maximize returns in the process.
Today, I get to be that girl walking by the pool, sounding the alarm that something is going on beneath the surface. Together, we have the power to break this cycle of implicit gender bias in start-up funding. Let's give the most promising start-ups, regardless of whether they're led by men or women, a fighting chance to grow and thrive.