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Tackling the Gender Gap in Entrepreneurship

by Sarah Kaplan

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 non-financial 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 ‘contest’ (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 hyper-competitive 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.

Sarah Kaplan is Director of the Institute for Gender + the Economy, University of Toronto Distinguished Professor of Gender and the Economy, and Professor of Strategic Management at the Rotman School of Management.

This article originally appeared in The Inequality Issue (Fall 2017) of Rotman Management. The magazine offers the latest thinking on leadership and innovation and is published three times a year. 

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