Field experiment uses fake emails to measure gender and racial bias among startup investors | 11/16/2017 | Staff
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During his six years teaching a course on financing for startups, Ilya A. Strebulaev heard a common concern from students: Silicon Valley investors discriminate against women and people of color.

A finance professor at Stanford Graduate School of Business, Strebulaev had encountered plenty of anecdotes to support this assumption. Often-cited statistics also seemed to suggest gender bias: For every dollar invested in startups with female founders in 2017, male-founded companies got $35. And fewer than 10 percent of U.S. venture capitalists are women.

Research - Investors - Men - Strebulaev - Wisdom

Yet no field-based research had proven that startup investors favored white men. So Strebulaev set out to test the conventional wisdom in the real world.

Along with Will Gornall, his former student and a finance professor at the University of British Columbia, Strebulaev sent 80,000 emails pitching fake startups to 28,000 venture capitalists and angel investors, signed with names indicating gender and ethnicity. The results of the field experiment were unexpected: Entrepreneurs with female and Asian-sounding names received a higher rate of interested replies than their presumed male or white counterparts.

Bias - Favor - Entrepreneurs - Stage - Investment

"We were surprised to find bias in favor of female and Asian entrepreneurs at this initial stage of the investment pipeline," Strebulaev says. "That doesn't mean there's no discrimination against them overall—we know the pipeline is leaky, but we don't know where."

Pulling off the experiment wasn't easy. First, Strebulaev and his collaborator asked students at Stanford and the University of British Columbia to create email pitches from fake startups offering a promising product or service, without overlapping too closely with existing companies. Feedback from professional investors helped the researchers select 50 strong pitches across industries like energy, healthcare, and information technology. The researchers verified that the company names were unique and created a basic website for each (the fact that all were "very early stage" would explain the lack of...
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