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The Real Reason Female Entrepreneurs Get Less Funding

Original Content Publication Date: 12/20/2018

Summary

Dana Kanze focuses on the correlation between gender biases and start-up funding. While women have founded 38% of US companies, they only receive 2% of venture funding. In her research, Kanze discovered a prominent presence of the social psychological theory of regulatory focus that differentiates between two motivational orientations of promotion and prevention during the question and answer section of an entrepreneur’s pitch to investors.

  • The promotion focus is concerned with gains and emphasizes hopes, accomplishments and advancement needs.
  • The prevention focus is concerned with losses and emphasizes safety, responsibility and security needs.  
Kanze discovered that most male entrepreneurs are presented with predominantly promotion-based questions while female entrepreneurs are presented with predominantly prevention-based questions. This leads to the enormous gap in funding that male and female entrepreneurs raise. 

Key Points

  • There is an enormous correlation between gender biases and new venture funding
  • There is no difference in the way male and female entrepreneurs present themselves or their companies that would lead to the different questions that they are asked
  • 67% of questions presented to male entrepreneurs are promotion-based, while 66% of the questions presented to female entrepreneurs are prevention-based
  • Entrepreneurs who were asked predominantly promotion-based questions received 7x as much funding and entrepreneurs who were asked predominantly prevention-based questions
  • Entrepreneurs who responded to prevention-based questions with promotion-focused answers raised 14x as much funding as entrepreneurs who responded to prevention-based questions with prevention-focused answers

Discussion Questions

  1. What is the difference between promotion and prevention based questions?
  2. What is the correlation between gender biases and new venture funding?
  3. What is one strategy that can be used to avoid the discrimination of gender biases when affronting questions from venture capitalists?

REFERENCE

 Link to original article


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