Thursday, March 22, 2012

How Do Women “Start-Up” Differently?

The Woman: Lakshmi Balachandra, WAPPP Fellow; Visiting Assistant Professor, Entrepreneurship & Innovation, Northeastern University

The Talk: Entrepreneurial Women! Exploring the Role of Gender in Short-Term and Long-Term Entrepreneurship

The Question: Does gender matter when securing seed funding?

Most policy makers and academics agree entrepreneurship is a catalyst for economic growth and global competitiveness. It creates new jobs, stimulates wealth, and increases overall GDP and standards of living. Yet, while women account for 55 percent of start-ups, they receive less than 5 percent of seed funding -- why is this?

Introductory Statistics:

  • According to the Global Entrepreneurship Monitor, women started 104 million businesses in the world in 2011.
  • Women start businesses more frequently than men, but many times these businesses are not documented because they are considered second jobs.
  • Women view entrepreneurship as attractively as men - they want to become entrepreneurs.

What explains this 5 percent?

Many myths perpetuate this dismal statistic. They include: women have different networks than men; women come from different backgrounds and professional experiences; women don’t “think big enough”. The Diana Project countered many of these myths over a decade ago in Women Business Owners and Equity Capital: The Myths Dispelled. Thus, Balachandra’s current research looks to understand the differences at the early stages of entrepreneurship, or more specifically, the “pitch”.

Balachandra’s research analyzes three years of “pitches” from the MIT’s prestigious $100K Entrepreneurship Competition to determine what makes pitches successful when attracting early-stage capital investment. By coding separately for body language, verbal phrases, and style, Balachandra found the most successful pitches were ones in which the presenters were confident, calm, and optimistic. For women, being assertive, dominant, and ambitious were viewed more positively.

How did gender play out in the competition?

While women were less likely to initially pursue high growth entrepreneurship opportunities (26 of the 185 pitches were by women), Balachandra's research found that women were stronger presenters than men. Furthermore, women received more than 30 percent of the awards in the last three years, even though they were only 14 percent of the pitches.

Additionally, women were more likely to start a business after the competition than men (95 percent compared to 75 percent) even if it was not the business she initially pitched. Balachandra says that, “once women were introduced to entrepreneurship environment, they were more likely to pursue entrepreneurship, regardless of short term success.”

Melissa Sandgren is a MPP1 at the Harvard Kennedy School and a participant in WAPPP's From Harvard Square to the Oval Office program.

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