Networking Frictions in Venture Capital, and the Gender Gap in Entrepreneurship

In venture capital competitions, exposure to more VC judges increases male, but not female, participants’ chances of founding a VC-backed startup. This is in part due to male participants' increased likelihood of proactively reaching out to judges after the competition.

• Each additional VC judge that a male founder was exposed to in a pitch competition increased their likelihood of starting a VC-backed company by 25%.
• Male founders were 81% more likely than female founders to proactively reach out to VC investors after pitch competitions
  • Female founders reported that they were hesitant to reach out to VC judges after pitch competitions if the competitions did not explicitly encourage this behavior.
• There is no evidence that male VCs discriminate against female founders
  • VC investors are equally likely to respond to male and female participants’ outreach after the competition.
  • VC judges score female-led ventures slightly higher than they scored male-led ventures.
• Exposure to judges who are not in VC but are in related fields (such as corporate executives, lawyers, and academics), does not influence male or female founders’ likelihood of starting a VC-backed company.

VC pitch competitions compound the gender gap in entrepreneurship by creating informal networking opportunities in which male participants often leverage VC connections for future opportunities, but female founders often do not. To close the gender gap in these situations of networking frictions, the researchers recommend that competitions formalize networking opportunities between VC judges and participants, instead of relying on individuals to proactively reach out.

In this study, researchers examined whether exposure to more judges in a VC competition increased participants’ chances of founding a VC-backed startup. The archival data was taken from the Harvard Business School’s New Venture Competition (NVC) from 2000 to 2015 and sampled 964 participants. Although this study is not strictly a randomized controlled trial, the judges-and-participant pairings in the NVC were already randomly sorted according to the competition’s design. The archival NVC data obtained by the HBS staff were anonymized but contained specific background information about each participant. This allowed the researchers to control for numerous individual characteristics, such as venture sector, college major, stated interest in entrepreneurship when entering HBS, and entrepreneurship experience prior to attending HBS. Furthermore, the researchers were also able to control for various aspects of the competition, such as the number of ventures in each panel, the score that each venture received, and whether a venture ultimately won.

In order to investigate the mechanisms behind the study’s results, the researchers conducted a follow-up survey for NVC participants, asking them whether they reached out to the VC judges after the competition, and whether the judges replied. While there may be a number of overlapping factors influencing women’s likelihood to succeed in venture capital, this study sample sheds light on the particular obstacles faced by a pool of highly ambitious, well-connected potential entrepreneurs with serious interest in this industry. The controls in this study were the judges on the panels who were not venture capitalists but rather highly successful individuals with some connection to entrepreneurship (such as lawyers for startups and executives leading corporate venture programs). Although this study is based on a sample of a very elite group of potential entrepreneurs, researchers argue that the data may be generalized to entrepreneurship more broadly.