Asking better questions: The effect of changing investment organisations’ evaluation practices on gender disparities in funding innovation

Female innovators raise fewer resources from investors, even when their ventures are observably similar to those of all-male teams. Efforts to mitigate these disparities have typically focused on changing how founders seek investment. However, the causes of gender disparities are systemic: in uncertain contexts, evaluators value women’s competence or leadership potential lower than men’s, and investors inquire more about risks when facing female founders than males. To examine the effect of investment organisations’ evaluation processes on gender disparities, this paper uses a two-stage global field experiment with investors making 1,871 investment decisions on early-stage startups over an evaluation process, which resulted in $320,000 invested in 16 startups. The experiment changed an organisation’s evaluation framework to systematise investor inquiry across all ventures by including prompts about risk and reward and progress during the evaluation period. This caused treated investors to assess startups more consistently and assess startup competence more dynamically than control investors. It eliminated, even reversed, the gender gap in investment outcomes. These results have implications for organisations making decisions in uncertain contexts, and those aiming to reduce gender disparities.

The working paper can also be found here.