Deep diving into gender bias in entrepreneurship

According to a 2019/2020 Global Entrepreneurship Monitor (GEM) Report, 231 million women launched or operated businesses in 59 economies around the world. A 2015 McKinsey Global Institute Report suggested that women could add $28 trillion to the global GDP if given identical roles as men in the labor market.

But women need capital to start businesses, and according to University of Delaware Professor Daniel Lee, gender homophily, or when people seek or are attracted to people similar to themselves, might be stopping that from happening. Lee, who is an assistant professor in entrepreneurship at the UD’s Alfred Lerner College of Business and Economics, recently published Gender bias in high stakes pitching: an NLP approach, in the journal of Small Business Economics, which gives insight into this real-world problem.

Lee also serves as a faculty member with UD’s Horn Entrepreneurship, a top 50 program as noted by Entrepreneur/Princeton Review, in the Lerner College. His research focus is on gender bias in entrepreneurship and on finding results to help future entrepreneurs. He is also studying the effects of free time on entrepreneurship.

Lee and his coauthor, Indu Khurana, associate professor of economics and business at Hampden-Sydney College, studied gender bias in pitch competitions. They analyzed Season 3 of the NBC show Shark Tank, and used Natural Language Processing (NLP) software to study the biases of the judges, and how those biases go on to impact the entrepreneurs.

Their research showed that male judges were more likely to use positive language when addressing pitch teams that had at least one female, but they were less likely to ink a deal and provide funding to those teams. Furthermore, the opposite was true for female judges. Female judges were less likely to give exaggerated positive feedback to pitch teams with females, but they were more likely to sign those teams to deals.

Lee answered a few questions about why this occurs and what this bias means for women interested in breaking into entrepreneurship

Lerner: What were the overall takeaways of your research, and what do the results mean for future entrepreneurs?

Lee: There are two big takeaways from the results. The first shows a bias in entrepreneurship. Big takeaway two is that the bias is a little more nuanced and a little less clear cut than at first blush. I anticipated men would talk down to women and use negative words and polarized language. However, the data shows when men are talking to women they use kinder words and less polarized language, but then go on to refuse funding.

Next is your question, what does that mean? I think it means there’s work left to do. We have this goal of making access to entrepreneurship and access to funding more fair and equitable. However, because these biases are at play and not as obvious, we need to understand the scope of this bias and level the playing field for entrepreneurs.

Lerner: Can you explain NLP and how it aided in your results?

Lee: NLP means natural language processing. It’s basically the way a computer will read words. The type of NLP we used is called sentiment analysis. Sentiment analysis extracts tone from text, which helps the computer identify if people are speaking positively or negatively. What we did is use the transcripts from season three of Shark Tank and examined the whole transcript, both the judges and the entrepreneurs. A Sentiment analysis NLP program allows for computerized standards to gauge how people reacted and measured positive or negative tones through word use.

Lerner: What are heuristics? What is homophily? How did these concepts help to advance your research?

Lee: A heuristic is basically a rule of thumb. It’s like a mental shortcut that your brain takes. One of those shortcuts is homophily. This means we like things that are similar to us. In terms of entrepreneurship, an example could be that male venture capitalists (VC) are more likely to fund male led teams while female VCs are more likely to fund female lead teams. If these mental shortcuts exist, consider more VC firms and more venture capitalists are male, and engaged in this sort of thinking. Results would show fewer female firms are getting funded. Since this bias is less obvious, we need to understand it to overcome it.

Lerner: What are some suggestions for female entrepreneurs entering pitch competitions?

Lee: The number one thing is just forming a connection with the panel you’re pitching to. You tend to see people who can bring a more personal component, or a great story doing well. There are points you want to address in any pitch, whether it is entrepreneurial or not:

  1. What the heck are you doing?
  2. Why the heck are you doing it?
  3. Why the heck should the panel care?

Being able to build that personal story helps answer those three questions quite well. All of this advice could go either way, but one of the things we found in our data is that women are less likely to ask for money. Women should ask for more and not just assume it will be offered. Go big, don’t be conservative, give up less, and find every opportunity to pitch your idea.

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