User:Acuza/gendered processes

Human, Social, Financial Capital Barriers

One of the arguments the study of gender discrimination in venture capital funding is that the demand for skilled women entrepreneurs is greater than the supply. In 1999, the Diana Project showed that contrary to conventional wisdom, many of the women who were not financed through growth capital had the necessary skills to build a high growth business.

Other research has shown that women entrepreneurs are already launching ambitious businesses in the high-technology industry, expanding their social networks, and making their pitches more relatable to the male-dominated VC industry, despite many industry people believing that women are not doing that. Some studies, though, have looked at the social networks of women entrepreneurs, showing that their networks are different from that of their male counterparts and aren't overlapping as much with financial networks. An entrepreneur's social capital is defined by the networks they have access to, and receiving private equity funding is heavily influenced by an entrepreneur's social capital and whether it overlaps with that of venture capitalists. Thus, women continue being disadvantaged in that respect when looking for private equity funding.

Another important factor in receiving private equity funding is an entrepreneur's human capital, derived from education, training and experience. Some studies have shown that women were less likely to have the necessary experience in executive or technical management, since they tended to be more present in the retail, finance, service and real estate sector. This has lead other researchers to study female entrepreneurs with extensive human capital, to identify whether they still face discrimination in their funding search. In a study that used data from MIT Venture Mentoring Service, it was found that women with a strong human capital were still less likely to pursue their high-growth business ideas full time. Education, especially in the STEM fields, is another barrier that women face in achieving the necessary human capital.

Gendered processes in finding financing

A different approach to researching the gender discrimination in venture capital funding is studying the gendered processes of looking into financing.

It has been shown that in the venture capital world there is a strong tendency towards homophily, meaning that people with a certain backgrounds will associate themselves to individuals with a similar background. This leads to entrepreneurs seeking financing from members of their sex. Their results confirm this hypothesis since only 8.9% of proposals brought to VCs were put forward by women, even though the authors couldn't find a statistically significant difference between the probability for women and men to receive equity. This poses a huge challenge for women entrepreneurs seeking financing from other women, since the number of women venture capitalists has decreased from 10% in 1999 to 6% in 2014, which is why the Diana Project argues that for increasing women-led ventures' access to capital there should be more women VCs.

At the same time, these statistics could also be explained by the higher requirements that women face when submitting a proposal for VC financing. In one study, it was found that financing evaluators see women without a technical background as less capable than males without a technical background. Women with a technical background had an advantage to their male counterparts for being evaluated as more sociable and having better leadership skills. This also meant that for women to be seen as legitimate entrepreneurs they needed to exhibit higher qualifications than male entrepreneurs, needing both a technical background and a higher social capital, thus strong social ties with people from the industry. This shows that for evaluators to trust women entrepreneur's abilities they need to see a greater potential in them than in their male counterparts, likely due to gender stereotypes.

Other studies, though, have shown that these are not the only obstacles women face due to the stereotypes associated to their gender. Multiple studies on discrimination faced by women seeking financing for their ventures have been built on top of the gender role congruity theory, which states that individuals expect men and women to act in ways that match their gender stereotypes. In one study it was observed that qualities associated to successful entrepreneurs converged to attributes that evaluators assigned to male entrepreneurs, while the characteristics opposite to those of an ideal entrepreneur were generally attributed by evaluators to femininity. This highlights the fact that gender stereotyping is consistently being used in venture capitalists' decision making process.Gender stereotyping in the VCs' decision making was also emphasised in a different study that showed that men and women get asked different questions during their pitches. The questions targeted towards the women entrepreneurs are focused on prevention and loss, while their male counterparts receive questions focused on potential gains. While women got asked questions like: "How predictable are your future cash flows?", men were asked: "What major milestones are you targeting for this year?". The authors note that this approach sets up women for failure from the very beginning.

Entrepreneurs are not the only ones affected by gender stereotypes. The whole process of seeking financing, from the relationships between entrepreneurs and investors, to the human and social capital have been shown to have gender embedded in them. It has been shown that women tend to emphasise the human and social capital they have, in an effort to compensate for the lack of resources usually associated to the ideal entrepreneur, especially since other studies have shown that the ideal entrepreneur usually has attributes generally associated to male entrepreneurs.^[3]In an effort to emphasise their potential, women also tend to stress the involvement of men as board members and board chairs in their ventures. The authors have classified women entrepreneur's strategies that emphasise more "masculine" attributes of their venture, such as growth ambitions, as compensatory signalling strategies.Another aspect highlighted by this study is that industry experience in "feminine" industries, such as the spa and fitness industry, is seen as less valuable by investors than experience in industries generally associated to masculinity, such as the petrol industry.

Venture capitalist's gendered view of entrepreneur's experience is only one of the examples of having women entrepreneurs held at different standards than their male counterparts.In a study focusing on the financing received by entrepreneurs from banks it was found that male entrepreneurs received more funding than their female counterparts, despite having the same number of employees and past performance track record (two factors that show viability for a business). Thus, women's strong track records did not correlate as strongly with the funding received as for men, and so for the same business attributes their reward was lower.