Corporate Governance,Social Responsibility

More female investors don’t always spell allyship

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While women face greater difficulties in the male-dominated entrepreneurial ecosystem, the increase of female investors may fail to close the gender gap

Entrepreneurship provides ordinary people an opportunity for success, yet not everyone has equal access to achieve it. The glass ceilings are thicker for women entrepreneurs, as they have to face numerous obstacles on their journey such as gender biases, social pressure to balance work and personal life, and limited access to financial capital, among others.

Much literature has indicated that women entrepreneurs face heightened challenges in securing funding in male-dominated fields. In a 2023 report titled The funding gap, UBS disclosed that female founders tend to raise significantly less funding with a median of US$50 million compared to their male counterparts with US$226 million.

However, opinions differ on how to close the gender gap. Some suggest that increasing the number of female investors could alleviate gender bias and provide greater support, while others hold the opposite. This posits a burning question: Does adding female investors to decision-making groups of venture capital firms improve gender equality in funding opportunities?

Contrary to our intuition, we found that decision-making groups with higher female representation are less likely to fund women-led businesses in the male-dominated venture capital industry.

Professor Jiang Han

“Contrary to our intuition, we found that decision-making groups with higher female representation are less likely to fund women-led businesses in the male-dominated venture capital industry,” says Jiang Han, Associate Professor of the School of Management and Economics of the Chinese University of Hong Kong (CUHK), Shenzhen.

Men have been dominating venture capital firms, including the firms’ decision-making group. Professor Jiang argues that the rise of women may be perceived as a threat to such privilege, leading men to favour individuals of the same gender and offer less support to women-led businesses. The increasing number of women in the decision-making group doesn’t seem to be able to change this.

The study titled Breaking barriers or maintaining status quo? Female representation in decision-making group of venture capital firms and the funding of women-led businesses was conducted by Professor Jiang, in collaboration with Professor Xu Lei of the University of Missouri-St Louis, Professor Amy Ou of Hong Kong Polytechnic University and Professor Park Haemin of the University of Texas at Dallas.

Negative link persists

To better understand the impact of female representation in decision-making groups on funding for women-led businesses, the researchers collected data from 151 US-based venture capital companies. They also conducted 20 semi-structured interviews using a qualitative approach to complement and enrich their quantitative findings.

When women form the majority in the decision-making groups, they may become more concerned about their organizations’ legitimacy among male-dominated investors.

After the analyses, surprisingly, researchers found that female representation is negatively associated with the funding of women-led businesses. More specifically, adding one additional female senior venture capitalist leads to an approximately 0.46 per cent decrease in the proportion of women-led businesses.

This negative relationship persists regardless of whether women constitute the majority within the decision-making group or not. When women are in the minority, men may leverage their dominance to assert their preferences during decision-making processes, while women defer to their male counterparts by adopting men’s preferences during investment decision-making.

“Such a tendency is driven by their desire to be perceived as valued and accepted group members,” Professor Jiang explains.

While some may argue that the increasing number of female members in the decision-making group could solve the problem, the findings paint a rather bleak picture. Professor Jiang attributes this to female senior members’ attempts to establish “external legitimacy”.

The gender composition of a predominantly women-led decision-making group becomes a notable characteristic that could capture attention. Consequently, when women constitute the majority in such groups, they may develop heightened concerns about their organisations’ legitimacy within the male-dominated investor community.

“To establish external legitimacy, female senior venture capitalists in these groups may opt to conform to, or even internalise, the prevailing norms and practices that favour men,” says Professor Jiang.

Neutrality and shared values work best

While the larger presence of female investors in venture capital firms’ decision-making groups may not yield optimal outcomes, the study proposed two solutions. Firstly, the increasing number of politically neutral senior venture capitalists—those who adopt unbiased or inactive political stances or identities—can weaken the negative effects.

Political ideology, regarded as a manifestation of beliefs and values, is recognised as a distinct form of identity. Politically neutral group members are often regarded as “thorough, rigorous, fair, and frank” because they avoid favouring a single viewpoint and embrace diverse perspectives. They play a crucial role in building connections among group members, fostering mutual appreciation, reducing prejudice and perceived threats between subgroups, and facilitating team unity.

Neutrality and shared values play a crucial role in building connections among group members.

“When a greater number of group members share a neutral identity, they are better equipped to facilitate meaningful conversations within the group and forge connections among diverse group members, resulting in a denser network structure,” Professor Jiang says.

Secondly, prior affiliation also plays a role in this competitive field. Professor Jiang notes that when decision-making groups include more members sharing more prior employment affiliations, the adverse impact of female representation in a decision-making group can be mitigated.

“Individuals, both men and women, who have worked for the same employer have typically undergone similar socialisation or training programmes, utilised the same professional jargons, shared employer-specific anecdotes, and, as a result, developed similar professional values and perspectives,” he says, adding that such shared experience can foster smooth and effective communications.

Fostering inclusive ecosystems

The increasing presence of female venture capitalists nowadays is expected to foster a more gender-equal ecosystem for entrepreneurship. This perspective may require further refinement as enhancing women’s involvement in a singular domain may inadvertently trigger undesirable consequences of less funding to women-led businesses.

However, Professor Jiang emphasises that the study should not be interpreted as a call to halt efforts to add more female investors in male-dominated industries. “We recommend that the drive to increase female representation in venture capital firms should persist until women attain equal status with men at the broader entrepreneurial ecosystem level,” he says.


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Furthermore, the study offers insights for policymakers aiming to foster an inclusive entrepreneurial culture. This can be done through promoting specialised academic programmes and seminars geared towards encouraging and educating women aspiring to be venture capitalists, to name a few.

“By offering greater recognition and resources to support women in these roles, policymakers can foster the development of a gender-inclusive culture within the entrepreneurial ecosystems, empowering women to bring more communal values and stakeholder orientation to their investment decisions,” Professor Jiang adds.

Finally, as the study was conducted in the US companies setting, he notes that the findings may not apply to other industries or contexts where women dominate, but offer a nuanced perspective on how to address gender-based funding disparities. “Policymakers should embrace a holistic approach, duly considering the wider implications of their policies.”