Solving the problem of missing women entrepreneurs

Both men and women investors need to be made aware of their biases, albeit unconscious, towards who is an entrepreneur, how they stereotype women versus men entrepreneurs, how their biases impact objective decision-making
Women own only 13.76% of the enterprises and are founders of 6% of the Indian startups. (Shutterstock)
Women own only 13.76% of the enterprises and are founders of 6% of the Indian startups. (Shutterstock)
Updated on Nov 19, 2021 10:05 PM IST
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ByNeharika Vohra and Kashika Sud

In India, women comprise 49% of the total population. The Gender Parity Index (GPI) for enrolment in higher education for 2019-20 was at 1.01% compared to 1.0% in 2018-19, indicating that more women are attending higher education in the country. Yet, their presence in the world of work is highly skewed, especially as entrepreneurs.

Women own only 13.76% of the enterprises and are founders of 6% of the Indian startups. Startups with at least one women co-founder raised only 5% of the total funding raised by startups between 2018-2020, and this further shrunk to only 1.43% of the total investor funding in the startup ecosystem, when only women founders were considered.

In India, with the exception of Nykaa, led by Falguni Nair, no women feature in the unicorn and soonicorn list. Across the world, only 20 startups were founded by women that initiated an initial public offering (IPO) and are currently traded. The reason for such lacklustre numbers of women entrepreneurs can either be that women are not competent or interested in running businesses, or there are systemic reasons for the sparse presence of women in business.

A substantial amount of research has focused on the woman founder as the focal point to explain the gender gap. The reasons for fewer women entrepreneurs or leaders have often focused on what women lack. It has been said that while entrepreneurs are expected to be risk-taking, confident, and competitive, women are assumed to lack risk-taking appetite, communicate long-term vision and scalability, and commitment to making their startup big. Entrepreneurship is normatively viewed as men’s work, and thus, women as founders of businesses are seen as counter stereotypical. This is, of course, a deeply flawed view.

First, most personality traits are distributed fairly equally among men and women. Second, when women try to overcome the “deficit”, they are punished by society for trying too hard. For example, women who make their pitches with passion are seen to be emotional, and thus, not suited for running a business. Similarly, women who are competent are perceived as cold and self-serving, and thus, as potentially incapable of building a team.

An alternative line of enquiry and work that is being pursued is exploring the biases exhibited by investors in their funding decisions. Good looking young men have the best chance to be funded and not so good-looking older women have the least. When men use complex abstract language, it is viewed positively by investors; however, when women use abstract language they are seen as not suitable for the practical world.

On top of it, when women founders make clear concrete pitches, it is often seen as lacking in a vision for growth. Investors have been found to ask different types of questions to men vs women. Men making pitches are asked promotive (signifying presence and possibilities) questions and women making pitches are asked preventive (signifying absence and avoidance) questions. A majority of investor groups are comprised of and are led by, men, and investment committees are mostly male-dominated. Only three of the top 20 venture capital firms in Indian have one woman partner.

The rest do not have a single woman partner. Additionally, only 2% of the angel investors are women. In male-only or male-dominated investor groups, homophily (a tendency for us to like people who are like us), a fundamental bias among humans, possibly impacts decision-making.

To overcome such unconscious biases, one of the suggestions is that at least one or more women investors be included in the investment group. This recommendation comes out of the belief that when there is a diversity of gender in the decision-making group, there is a likelihood that women seekers of funds will get a fairer hearing and possibly receive more favourable decisions.

Theoretically, adding more women should change the team dynamics and possibly serve to break the spiral of gender role expectations in determining outcomes. However, the inclusion of one or two women rarely works because majority group members biases percolate through the group and provide momentum to the “flywheel” of self-reinforcing beliefs. The individual mindsets of majority investors and imbibed widespread stereotypes of the women entrepreneurs further multiply into a group phenomenon and perpetuate deeply embedded gender biases.

Thus, even when there are women in the investor group, the stereotype would perpetuate, ultimately impeding women entrepreneurs’ access to capital.

Both men and women investors need to be made aware of their biases, albeit unconscious, towards who is an entrepreneur, how they stereotype women versus men entrepreneurs, how their biases impact objective decision-making, how they treat the same behaviour coming from a woman versus a man and so on.

While biases can never be eliminated, it has been shown that when we are exposed to them, we are less likely to let them influence our decisions. Based on our current research, we believe that having more than a token woman is necessary for making an impact on the group dynamics that propel groups to make biased decisions.

Having at least half the group comprised of confident women, well-versed with business and financial deals, who are also made aware of their biases, would possibly give women entrepreneurs an equal chance to be funded. In the long run, we also need more women to join investor companies, and we need more of them to start investment companies.

Prof. (Dr.) Neharika Vohra is vice-chancellor, DSEU and professor, IIMA. Kashika Sud is a doctoral student, IIMA

The views expressed are personal

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Tuesday, November 30, 2021