Investors Prefer Entrepreneurial Ventures Pitched By Attractive Men via Harvard Business School
Alison Wood Brooks, Laura Huang, Sarah Wood Kearney, and Fiona E. Murray
Abstract:
Entrepreneurship is a central path to job creation, economic growth, and prosperity. In the earliest stages of start-up business creation, the matching of entrepreneurial ventures to investors is critically important. The entrepreneur’s business proposition and previous experience are regarded as the main criteria for investment decisions. Our research, however, documents other critical criteria that investors use to make these decisions: the gender and physical attractiveness of the entrepreneurs themselves. Across a field setting (three entrepreneurial pitch competitions in the United States) and two experiments, we identify a profound and consistent gender gap in entrepreneur persuasiveness. Investors prefer pitches presented by male entrepreneurs compared with pitches made by female entrepreneurs, even when the content of the pitch is the same. This effect is moderated by male physical attractiveness: attractive males were particularly persuasive, whereas physical attractiveness did not matter among female entrepreneurs.
Investors Prefer Entrepreneurial Ventures Pitched By Attractive Men – Introduction
Entrepreneurship, the creation and construction of new-to-the-world ventures by individuals and small teams, is a critical activity in modern economies (1). Although new ventures of all types have a role in the economy, the formation of high-potential, innovation-driven ventures is widely regarded as a central path to job creation (1), economic growth, and prosperity (2–4). For example, entrepreneurial start-up ventures contribute almost 20% of new job creation annually in the United States.
In the earliest stages of start-up business creation, the matching of entrepreneurial ventures to investors is important because new businesses need funding to survive, and high-potential ventures need capital to grow and succeed (5, 6). The fundamentals of the entrepreneur’s business proposition and the previous experiences of the entrepreneurs themselves are regarded as the main criteria for investment decisions (7, 8). Our research, however, documents other criteria that investors use to make these decisions: the gender and physical attractiveness of the entrepreneurs themselves.
Around the world, there are more male entrepreneurs than female entrepreneurs, with total entrepreneurial activity led by men in the vast majority of countries (9). In the United States, men engage in entrepreneurial activity at almost twice the rate of women (10). Among high-growth-potential ventures, only 11% of US firms with venture-capital backing, past and present, have been founded or led by women (11), and women-led ventures have received only 7% of all venture funds (12).
The gender imbalance in entrepreneurship has been attributed to a persistent incongruence between personality attributes ascribed to women and personality attributes ascribed to entrepreneurs (13, 14). This perceived lack of fit makes women less likely to pursue and to be selected for male gender-typed roles such as that of entrepreneur (15, 16). Compared with men, women in male gender-typed positions are more likely to have their performance devalued, less likely to receive opportunities for career advancement, and more likely to encounter challenges and skepticism in starting and running ventures (17–27).
Although the gender imbalance is undesirable and challenging for female entrepreneurs, it remains unclear whether the gender imbalance is due to irrational investor behavior. If male entrepreneurs are inherently more talented or more likely to be at an advantage throughout their ventures or throughout their careers, then the gender gap in entrepreneurship may result from rational statistical discrimination by investors. In the same way that participants in the classic Keynesian beauty contest game were asked to choose the most popular (rather than the most beautiful) contestant, investors may rationally seek to invest in male-led ventures that other investors and future customers are most likely to prefer.
Across the broad landscape of entrepreneurial ventures, it is unclear whether men outperform women. Some prior work has found that, compared with men, women are likely to have fewer employees, lower growth projections, and lower levels of internationalization (9). On the other hand, recent work using 15 y of panel data from the Standard & Poor’s Financial Services’ 1,500 firms suggests that female managers improve overall firm performance by bringing informational and social diversity benefits to the management team, enriching the behaviors exhibited by managers throughout the firm, and motivating lower-status women in the firm (28).
Answering the question about gender and entrepreneurial performance has been limited by two main challenges (29, 30). First, male- and female-led ventures tend to focus on different types of market opportunities with differing levels of underlying growth potential. Male entrepreneurs tend to pursue ventures across a broad spectrum of industries, whereas female entrepreneurs have predominantly pursued ventures that focus on the female consumer, such as fashion, cosmetics, and cooking. Notable examples of female-founded, female-focused companies include Mary Kay Inc., Estee Lauder Companies, Chanel S.A., Martha Stewart Living Omnimedia, and, most recently, Spanx Inc. and Tory Burch. Second, available sample sizes are small because there are far more male entrepreneurs than female entrepreneurs. Therefore, it has been difficult for researchers to make gender comparisons with matched samples. As a result, research has not disentangled the impact of entrepreneur gender from the impact of business type on entrepreneurial success. In the present research, we focus on how entrepreneur gender influences investment decisions, controlling for business type.
Who’s the Most Attractive Investment Opportunity of All? Good-Looking Men
Investors are much more likely to be receptive to business pitches from attractive male entrepreneurs than from “average Joes,” Wharton’s Laura Huang finds. But for women, beauty makes no difference.
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