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Tackling Venture Capital Bias Over Gender

The following article first appeared on Pacific Coast Business Times


Haley Pavone, CEO, Pashion Footwear

Some 27 percent of S&P 500 corporate directors are now women but only 5 percent of venture capital goes to women-owned firms.


One of the biggest gender gaps in all of corporate governance exists despite data that indicate potentially a much great chance for success in investing in startups with more diverse teams.


A study released in April by the Ewing Marion Kauffman Foundation found that women tend to start businesses with significantly less financial capital than men — using half as much debt and a third of the external equity.


Two women from the Central Coast with deep knowledge of the disparity in raising venture capital funds are digging deeper into the reasons why it exists. They see ways to change entrepreneurship programs and venture capitalists alike to overcome these inherent biases.


One of them is Kyle Lewis, executive director of the Technology Management Program at UC Santa Barbara. The other is longtime area CEO Kathy Odell, CEO-elect at the nonprofit Women’s Economic Ventures, which operates in Santa Barbara and Ventura counties.


The gap comes down to the makeup of venture capital teams and the questions they tend to ask, say studies published over the last five years by researchers at Columbia and Harvard business schools. Women also tend to spend more time in their pitches playing defense, something that costs them money and opportunity.

“These codes happen at a very implicit level in our brains,” Lewis said. “Our minds play these little tricks on us and the social science tells us exactly how that’s happening.”

In addition, many female founders pitch businesses for traditionally feminine markets, which might be unfamiliar to an all-male panel of investors, said Odell. Most entrepreneurs who do land investments tend to be in traditionally male industries like software and technology, unless they have an existing track record without venture capital funding.


Venture investors also tend to question founders differently based on gender, said one 2018 study elegantly titled “We Ask Men To Win and Women Not To Lose: Closing the Gender Gap in Startup Funding.” Where male founders tend to receive questions about their future milestones, licensing opportunities or other avenues of promoting the business, women are questioned more on their competition and how they will defend their market share.


“Those are subtle changes that will affect our mindsets even without really realizing it and can affect the degree to which investors are willing to invest in that firm,” Lewis said.


Venture capital firms can guard against it by standardizing their questions with a balance of the two, she said. Meanwhile, entrepreneurship programs can teach students how to flip the question in their answer to “implicitly reduce the gap that we’re seeing” without even invoking the question of gender bias.

Pitching a convertible high heel to panels almost entirely made up of men meant she had to spend a disproportionate amount of time in each pitch explaining the product and situations where it could be used, said Haley Pavone, founder of San Luis Obispo-based Pashion Footwear.


“No woman would ever ask me about that,” Pavone said. “When you have to spend a large amount of time justifying why the market needs this, that prevents me from getting into the more detailed and compelling parts of my business.”

As a young woman, Pavone said she was also frequently questioned about her credentials and experience, even when compared to younger men.


“I spend a lot of time explaining and justifying why I’m there, rather than talking about the merits of the business,” she said. “At the end of the day you have 10 minutes.”