Pitching to the choir: How gender-sector bias affects investment decisions

Imagine you are chatting with an entrepreneur who is eager to grow their business — confident, well-prepared, numbers in hand. The idea is solid, the plan convincing. You think about product-market fit, weigh operational risks, and start forming an impression of the venture.

Now pause for a moment. Would your view of the business change if the person pitching it were a man — or a woman?

The question may be hypothetical, but the implications are real. Around the world, women entrepreneurs continue to face major barriers to accessing entrepreneurial finance. Female business founders receive a disproportionately small share of venture capital funding, at only 1% of total capital invested in US venture-backed startups. An estimated 6% of venture capital goes to women-led firms in Sub-Saharan Africa. One study by the World Bank’s Africa Gender Innovation Lab and Briter Bridges found that in Africa, all-male founding teams raise roughly $25 for every $1 raised by all-female teams.

The financing gap may reflect many factors, such as sector choice, firm size, and access to collateral. However, research also points to investor bias. Studies from the United States have suggested that men are more likely to secure startup financing when delivering pitches that are identical to women’s, and men may be judged on potential where women are judged on risk. Perceived sector “fit” is also gendered: investors tend to trust women in female-dominated fields and men in male-dominated ones.

To explore the existence and extent of bias and whether these insights translate to African economies, we conducted an experiment. Working with the producers of the TV show Chigign Tobiya — Ethiopia’s answer to Shark Tank — we filmed a series of mock investment pitches in which trained male and female actors presented a series of business ideas.

The experiment varied only three key features of the pitches: the gender of the entrepreneur, the sector of the business, and the quality of the pitch. The sectors — construction, textiles, and food services — were chosen to reflect male-dominated, neutral, and female-dominated industries, respectively. The experiment involved screenings with two different audiences to watch and evaluate the videos. One group consisted of students from vocational colleges, representing potential entrepreneurs. The other group included microfinance loan officers, professionals who make real credit decisions in their day-to-day work.

Each participant rated the entrepreneurs in the pitch on leadership, reliability, and business potential. They assessed the level of risk and decided whether — and how much — they would recommend investing. A male actor and a female actor delivered the same script in each sector, and we tested whether men and women were rewarded or penalized when they violated gender-sector stereotypes.

The good news: we found little evidence of a general bias against female entrepreneurs. Our results show that the viewers recommended investment in ventures led by men and women at the same rate, and they proposed similar investment amounts. We also found no evidence that men invest more in men, or that women invest more in women. The loan officers — most of them men but working with a large share of female borrowers at their financial institutions — rated women’s pitches marginally higher than pitches delivered by men.

When we examined the results by sector, however, biases appeared. Construction, which is widely perceived  be a “male” sector, received the most investment and men received significantly more investment on average than women. In contrast, in food services, which received the lowest investment on average, female entrepreneurs were more likely to receive funding. In textiles, a more gender-neutral field, there was no difference by gender.

The differences stemmed from how the viewers perceived the entrepreneurs’ fit with their industry. They valued distinct skill sets in different sectors — leadership and negotiation in construction, customer focus in food services — and attributed those skills differently to men and women. Men received a higher rating on leadership and women on reliability, reflecting familiar stereotypes about who fits where.

These perceptions matter. Male-dominated sectors typically attract larger investments overall. Women who enter these industries thus face a double hurdle: competing on business fundamentals while also challenging the assumption that they do not belong in these industries.

What can be done to shift these perceptions? Our experiment tested a few simple ways to counteract bias, with encouraging results. Showing the participants a short video featuring a successful female CEO increased the likelihood that they would invest in women’s pitches. Likewise, a brief informational clip highlighting women’s earnings in male-dominated sectors led viewers to recommend larger investments to women in construction.

Taken together, these results carry important lessons for investors and entrepreneurs. When women know that financing decisions are not systematically stacked against them, they may be more confident in pursuing funding opportunities. At the same time, sector stereotypes remain powerful and tackling them requires action on both sides of the investment market. Unconscious bias training can help investors uncover and counter the stereotypes that influence decisions. For women entrepreneurs, exposure to successful role models — through networks, accelerators, or business events — can help those entering higher-return, male-dominated sectors. The result is a fairer, more efficient market for capital.