Does gender matter in start-up investment?

Jun 18, 2020 |4 min read
investment and debt struggle endowment effect

As with everything, the COVID-19 pandemic is expected to dramatically alter the start-up landscape globally. On the one hand, the massive layoffs will push some skilled people towards entrepreneurship; on the other hand, start-up funding has been hit hard - e.g. Series A+ deals in Asia have dropped by 33% between November 2019 and February 2020, according to Startup Genome

gender in investment

While funding levels will return to normal eventually (as with previous downturns), in the short term we expect to see a larger number of start-ups vying for a shrinking funding pie. Many more established start-ups will be looking for survival investment and will be competing with newer start-ups looking to accelerate their growth; while investors will have the unenviable task of investing their limited monies in the right opportunities. In this high-pressured and fluid environment, we wanted to understand if decision making by investors are completely objective in nature or do inherent human biases influence these decisions.

One of the dynamics that we wanted to focus on was that of gender. It is universally agreed that women-owned businesses find it harder to access capital and are more reliant (compared to men) on capital from personal (e.g. individuals) rather than external (e.g. financial institutions) sources. This results in comparatively limited growth opportunities for many women-owned businesses.

Biases against women entrepreneurs are blamed for this disparity - e.g. men are perceived to be more credible in a start-up context or better performers when pitching to potential investors.

We set out to test the existence of such biases in several South East Asian markets - do investors subconsciously favor men over women when considering investing in start-ups? And do investors admit to having a conscious preference towards male entrepreneurs?

We did this by surveying 750 retail investors across Singapore, Indonesia and Malaysia, using both direct questioning (do investors admit to being biased against women?) and an indirect approach (using an experimental approach to uncover implicit biases). The questions were asked in two phases:

1. For the experiment, we created various fictitious successful start-up businesses (a fintech and a food and beverage (F&B) business) and stated they were seeking growth investment, and whether the investor would be interested in investing. For each business, the investors were told the leader was male or female - with the gender altered across different respondents (but all other elements of the pitch remaining the same).

2. Following this, investors were directly asked if they have a gender preference in the leader of the business when they are considering an investment.

The results:

Investors (particularly men) have a conscious preference for male business leaders:

When directly asked, 4 in 10 investors indicated a preference for one gender - 25% preferred investing in a start-up led by a man compared to 12% who preferred a female leader (the remaining investors claimed gender was not important to them).

This preference towards male leaders was more pronounced among male investors, who had a 29% preference for a male leader vs. 10% preference for a female leader; however even female investors had a slight preference for male (19%) over female leaders (15%). 

gender in investment question

The bias against women was particularly evident in Singapore, one of the hot beds for start-up investing - one-fifth of investors stated a preference for a male leader, with almost no investors preferring a female leader (2%). This finding was also prevalent in Indonesia (40% vs. 22%), but was not evident in Malaysia (14% vs 12%).

However when measured implicitly, gender does not play a role in investment decisions:

The experiment results indicated that when all business factors are equal (and the investment opportunity is attractive), gender does not play a role in influencing investment decisions. Investors had similar levels of interest in investing in the promising fictitious businesses we presented (F&B or Fintech), irrespective of the business leader's gender.

This finding was evident across all three markets, with Malaysian investors having a slight preference for women-led businesses, especially for the F&B business.

Business factors are more important than gender for investments:

When asked, investors stated that cash flows and profit forecasts (100% of investors), experience of the business leader (98%) and the category competitive landscape (97%) were factors which would be important for them when they consider a business investment. Whereas as we saw above, a minority (4 in 10) consider the business leader's gender an important factor.


The results indicate that while investors use objective measures like cashflow and entrepreneur experience while making their investment decisions, they have an inherent preference for male business leaders.

This has a particular impact for women-led businesses who have just started or are in their initial stages of development (e.g. pitching for initial funding). The lack of objective measures (cash flow, experience etc.) for their business during this phase, combined with investors' preference for male leaders, makes getting the initial investments particularly challenging. This is supported by ample evidence showing that female entrepreneurs have a lower success rate than men at the pitch stage.

However, on the positive side, women-led businesses that overcome this hurdle will likely see the playing field levelling out as objective factors are prioritized over the gender of the entrepreneur.