Investors in tech start-ups do not trust female founders

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Investors in tech start-ups do not trust female founders, reveals new research by Vienna University of Economics and Business (WU).

The study, conducted by Sonja Sperber from Vienna University of Economics and Business her co-author Christian Linder, analysed the overrepresentation of men in tech start-ups.

They found that there is a lack of female founders in IT driven start-ups due to a perception that tech start-ups are founded by someone that is young, white, and male.

This effect plays a huge role in tech driven start-ups as their business models are seen to have more uncertainties than those in other industries, therefore investors look for ways to compensate for the uncertainty – by going for start-ups with male founders.

Male founders are seen to be less uncertain than their female counterparts because they fit into this stereotype of what not only a tech start-up should be, but any start-up.

“Even though the “distinctiveness” of female founders is important for investors, it does not play a crucial role. While female founders need to be as different as possible in order to stand out from the competition, the study suggests that being female already deviates too much from the normative standard,” says Sonja Sperber, the Department of Strategy and Innovation at WU.

She adds, “As a result, female founders are not able to prove themselves in the first place because they are simply denied the chance, or the investors’ funding, to do so, regardless of their education or experience.”

The study also found that education or support programs for women – something that politicians, associations and institutions have been promoting for a long time – are not the solution.

This is because the basic problem does not lie in education and training but can be traced back to female founders deviating too much from the stereotype.

Instead, the researchers suggest identifying niche markets in which women are not or less underrepresented, and working to establish an alternative stereotype, which filters into the tech sector.