⚖️The Hidden Bias in Startup Pitches

Gender, Race, and Startup Replies

Hey there! 👋 

Today’s article will make you look at the startup world from a whole different point of view. We all know the venture capital space is far from perfect, and bias is a topic that comes up quite often. But, what if I told you the story is more nuanced than you think? 🤔

🎓A fascinating new study published in Management Science (Gornall & Strebulaev, 2024) took an innovative approach to tackle this question. Imagine this:

80,000 pitch emails were sent to 28,000 investors, introducing fictitious startups with randomly assigned founder names to signal gender and race. The goal was to uncover how investors respond to cold pitches—without knowing they were part of an experiment.

What did they find? Definitely not what we expected. Let’s break it down.👀

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📊 Key Findings

  1. Female entrepreneurs received 9% more interested replies than male entrepreneurs. 👩🏻‍💼

  1. Asian entrepreneurs received 6% more interested replies than White entrepreneurs. 🌏

  1. The real barriers likely come later. 🚧

⭐What Makes This Study Unique?

📌Here’s the cool part: the researchers controlled for everything else. 

The fictitious startups were carefully crafted to reflect innovative but plausible ideas. The only thing that varied? The gender and race of the “founder,” signaled by the name in the email.

For example, “Adam Jensen” might pitch the same idea as “Jennifer Liu.” Investors didn’t know these were fake pitches (don’t worry, no real investors were harmed in the making of this study 😉). This design allowed researchers to isolate bias in a way that most real-world studies can’t.

🔎A Closer Look: Why These Results Matter

The startup world has long been criticized for its lack of diversity. For every $36 invested in male-founded startups, only $1 goes to female-founded ones. And while Asians are overrepresented as founders compared to their share of the general population, biases against minorities in areas like job applications are well-documented. 📝

So, what’s going on here? Why are female and Asian founders receiving more initial interest?🤔

But here’s the catch🚨: this doesn’t mean bias is gone. In fact, the study’s authors caution that these findings don’t reflect what happens in warm introductions or later stages of the investment process, where personal networks, face-to-face interactions, and deeper evaluations come into play.

And as we all know, most VC deals happen through referrals—not cold emails. 🔗

✍️A Lesson for Entrepreneurs

So, what can founders take away from this?

  • For cold emails: Be bold. If you’ve been hesitating to reach out to investors, this study suggests that female and Asian founders might have a slight edge in getting a response—so go for it! 🙌

  • The real challenge is breaking into networks. Warm introductions matter more than cold emails in the long run, so focus on building relationships and finding champions who can open doors. 🚪

  • Don’t let rejection stop you. Even with these findings, the average response rate was just 4.3%. Rejection is part of the process—but persistence is what gets results. 📈

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🖼️The Bigger Picture

Before we declare victory over bias, it’s crucial to remember that this study only looked at the first step of the investment process. 🏆

And let’s be real: getting a reply to your email is a far cry from closing a funding round.

🗝️Here’s what we know:

  • 🌐Networks still matter. Most VC deals don’t come from cold emails—they come through warm introductions from trusted connections. And women and minorities often have less access to these networks.

  • 📊Bias shifts at later stages. In face-to-face meetings, investors may fall back on stereotypes or implicit biases, which could explain why women and minority founders still raise less capital overall.

As the authors of the study point out, these findings shouldn’t be interpreted as proof that bias has been eliminated. Instead, they highlight the complexity of the issue—and the need to look beyond just the initial email reply rates.🙅

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👋🏻Parting Thoughts: A More Complex Story

The world of startup funding is still far from equitable. But this study reminds us that the dynamics of bias are rarely black and white. There’s still a long way to go. 💸

This is a reminder that bias isn’t always as straightforward as it seems—and that we need to keep digging deeper to uncover the real dynamics at play. 🕵🏻‍♂️

🎯 Let’s Keep the Conversation Going
What’s one situation where you feel your potential isn’t being recognized due to bias? Hit reply—I’d love to discuss how we can navigate these challenges together!

-Sparsh

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