Tack­ling the Gen­der Gap in En­trepreneur­ship

Rotman Management Magazine - - FROM THE EDITOR - Prof. Sarah Ka­plan pre­sented her re­search on in­no­va­tion ac­cel­er­a­tors at INSEAD’S Sin­ga­pore cam­pus in Jan­uary 2017.

As tough as it is for tal­ented women to climb the cor­po­rate lad­der, fe­male en­trepreneurs may have it even harder: Ac­cord­ing to a U.S. Se­nate re­port, a pal­try 4.4 per cent of the to­tal value of small-busi­ness loans went to women-owned busi­nesses in 2014; and last year, Bloomberg re­ported that women com­prised only seven per cent of founders re­ceiv­ing US$20 mil­lion or more in ven­ture cap­i­tal.

For in­vestors, fix­ing the flaws in the en­trepreneur­ship ‘mer­i­toc­racy’ would re­sult in bet­ter de­ci­sions and higher re­turns — ul­ti­mately ben­e­fit­ing the en­tire ecosys­tem. In my re­search with Peter Roberts of Emory Univer­sity, we are us­ing a gen­der lens to scru­ti­nize the per­for­mance of ‘in­no­va­tion ac­cel­er­a­tors’ — pro­grams whose ex­plicit goal is to give a boost to new en­trepreneurs — with two ques­tions fore­most in mind: Are these ac­cel­er­a­tors work­ing for women? And if so, how are they mov­ing the nee­dle?

Our early find­ings of­fer both good news and bad: While the right com­bi­na­tion of mes­sag­ing and meth­ods could help women make strides to­wards gen­der par­ity, most ac­cel­er­a­tors we stud­ied adopted ei­ther half of this equa­tion or none. They said they wanted to at­tract fe­male en­trepreneurs to their pro­grams, but then didn’t ac­tu­ally change any of their prac­tices to be more in­clu­sive.

Un­like in­cu­ba­tors, ac­cel­er­a­tors don’t of­fer phys­i­cal in­fras­truc­ture for op­er­a­tions. They are more like ‘en­trepreneur­ship boot­camps’, where a co­hort of start-ups is given fixed-pe­riod ac­cess to an in­tense reg­i­men of men­tor­ing and train­ing. Some are struc­tured as com­pe­ti­tions with a prize (usu­ally fund­ing) awarded at the end; for oth­ers, par­tic­i­pants re­ceive only non­fi­nan­cial re­sources, such as ed­u­ca­tion or ac­cess to net­works.

We an­a­lyzed 49 ac­cel­er­a­tors in the so­cial in­no­va­tion space — a field gen­er­ally thought to be fe­male-friendly, so that there would be enough fe­male par­tic­i­pa­tion to make a vi­able com­par­i­son. Sur­veys from the ac­cel­er­a­tors — as well as from more than 3,000 ven­tures that ap­plied to them over a two-year pe­riod (in­clud­ing those that were re­jected) — com­prised our dataset.

Hap­pily, our study found that ac­cel­er­a­tion does work, for both fe­male- and male-led teams. In­deed, we found no av­er­age dif­fer­ence in post-pro­gram per­for­mance that could be at­trib­uted to gen­der. A closer analysis, how­ever, re­vealed some telling gen­der dif­fer­ences.

Our first point of in­ter­est was the gen­der mix of the

ap­pli­cants. Not sur­pris­ingly, ac­cel­er­a­tors that made spe­cial over­tures to women ap­pli­cants received more ap­pli­ca­tions from women. Per­haps also not sur­pris­ingly, those who used lan­guage em­pha­siz­ing fi­nan­cial per­for­mance or solo en­trepreneurs rather than teams, received fewer ap­pli­ca­tions from women-led start-ups. This is con­sis­tent with well-pub­li­cized re­search demon­strat­ing that fe­male job-seek­ers are less likely than males to ap­ply for a job when they don’t ful­fill all of the re­quire­ments laid out in a job de­scrip­tion.

Ac­cel­er­a­tors who so­licited ap­pli­ca­tions from women not only received more, but also ac­cepted them at a greater rate than those that did not reach out to women. Also, pro­grams em­pha­siz­ing fi­nan­cial re­turns un­der-se­lected women — indi­cat­ing that women en­trepreneurs may have been ra­tio­nal in choos­ing not to ap­ply to these pro­grams to be­gin with.

What about per­for­mance? Not all women-led start-ups that went through these ac­cel­er­a­tors ben­e­fited equally one year later, or in fact saw any ben­e­fit what­so­ever. Ac­cel­er­a­tors with a crit­i­cal mass (30 per cent or more) of fe­male pro­gram lead­ers and men­tors were much more ef­fec­tive with women-led ven­tures. Ad­di­tion­ally, when the ac­cel­er­a­tor was run as a ‘con- test’ (with prizes), women alums per­formed worse one year later than their male coun­ter­parts; and when fund­ing was made avail­able to all ac­cel­er­a­tor par­tic­i­pants, women en­trepreneurs ended up out­per­form­ing the men.

One would hope that the ac­cel­er­a­tors with stated pref­er­ences for women would also be the ones with the best prac­tices for women — but that wasn’t the case. We found lit­tle cor­re­la­tion be­tween stated pref­er­ences for women en­trepreneurs and the use of gen­der-in­clu­sive prac­tices. In fact, many pro­grams that made spe­cial ef­forts to re­cruit women may have done their fe­male par­tic­i­pants a dis­ser­vice, by ex­pos­ing them to a hy­per­com­pet­i­tive pro­gram run al­most com­pletely by men.

The bot­tom line: Our fas­ci­na­tion with di­ver­sity — the nu­mer­i­cal rep­re­sen­ta­tion of women and mi­nori­ties — may ac­tu­ally be in­hibit­ing progress to­wards work­place equal­ity.

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