UNCA professor and co-author of Entrepreneurial Ecosystems: A Gender Perspective, Susan Clark Muntean, MBA, Ph.D. has a thorough understanding of gender disparities in entrepreneurship.

Muntean began her research before her first publication in 2011 with a focus on high-growth female-founded businesses and the equity gap in funding. “It’s enormous, and it’s not getting better,” she said.

In 2022, about 2% of venture capital funds went to female-founded businesses, and only about 1% of capital funds went to people of color. Muntean said over the last decade, female-founded businesses have received between 3% and 7% of this funding, but never more than 7%, and there has not been any trend of increase.

“This is a consistent problem, and the question is why,” Muntean said. “I’ve done more than a decade of research to find out why, and I’m in the next stage of finding out what can be done about it.”

With a body of researchers studying gender disparities in entrepreneurship, the majority of focus has been what’s wrong with the women — why are those businesses smaller, why don’t they hire more, and why are they undercapitalized. Some solutions over the last couple of decades have been women leadership and mentorship programs.

“The problem with these solutions is a lack of a theory of change, and we need a compelling theory of change to fix the problem,” Muntean said. “If the problem was that women aren’t as skilled or ambitious, knowledgeable, or confident, the theory would say once these intervention programs were in place, the problem should go away. If leadership and mentorship programs were the solution, we should see the Fortune 500 include 51% women, reflecting the population, but it’s been steadily only 6%.”

In her book focusing on systems, institutions, and culture, Muntean discussed macro variables within funding. She looked into why venture capitalists aren’t writing the check, looking instead at what’s wrong with the decision makers and gate keepers as opposed to what’s wrong with the women.

Implicit, second-generation, or unconscious bias has a part in the capital discrepancies, according to Muntean. Our brains have a lens through which they interpret the world, informed by our upbringing and social media.

“When we ask people to name five or 10 famous entrepreneurs, almost across the board they are all male,” Muntean said. “It’s the majority of what we see in movies, magazines, and on social platforms, and these check-writers have in their unconscious mind that deserving entrepreneurs have certain dispositions like being overconfident and charismatic. Without even having an awareness, they are more likely to write the check to a male-founded company.”

An experiment was conducted in which female-founded and male-founded startups going for venture capital presented their ideas. The study found that females get asked downside questions regarding risks and weaknesses, implying ‘going down that rabbit hole’ may seem risky. Alternatively, males were asked questions about upside potential and revenue projections, creating a disadvantage for females right out of the gate, and even female investors are more skeptical of female-founded startups.

Another reason for the disparity is networks, according to Muntean. While there are always exceptions to the rule, there is a big difference in how women use social networks. A concept in social network theory says there are two types of ties — weak and strong. Strong ties include long-time friends and family, and weak ties are more transactional like fellow members of a chamber of commerce.

“In the entrepreneurial world, weak ties are more likely to lead to finding resources,” Muntean said. “Research shows that women are more comfortable and more likely to rely only on strong ties, and this is true when asking for money. Men are on average more likely to feel comfortable going to weak ties and having more transactional conversations in the business world. Weak ties are incredibly important for gaining resources, partners, collaborators, support, and investors. Women are disadvantaged in this network.”

The sociological concept of homophily plays a role in the entrepreneurship disparity as well. This concept states that people are more likely to interact and engage with people who are similar to themselves. Muntean said this is not intentional nor based in discrimination; it’s simply human nature. Since 97% of venture capitalists are male, it takes a lot of intentionality to tap into the networks of minorities.

“Most entrepreneur support organizations are not great at this, but some do have great models of intentionality,” Muntean said. “Here in Western North Carolina, there is a real intentionality of reaching those populations, and we are seeing improvement in those models here.”

Implicit bias is another issue, according to Muntean. Women who received SEED capital from funding specifically for women were less likely to get funding at later stages. Investors became skeptical at later stages of capital need due to an unconscious assumption that the only reason they received funding is because of gender, and the business wasn’t otherwise worth the investment.

Muntean suggested five steps that can move the needle in the direction of equitable investments for entrepreneurs:

1. Awareness - Some people literally don’t see the gap. Though awareness of the support gap has grown, the problem won’t be solved without across-the-board understanding.

2. Will - Top-level leaders of funds need to have a commitment to bringing about these changes.

3. Knowledge - Many people know the disparity is a problem but don’t know how to fix it. They aren’t aware of factors like implicit bias, and would benefit from education on best practices.

4. Action - Leaders must take intentional action as well as change patterned behaviors.

5. Measurement - Investors must commit to transparency, accountability, and closing the loop by analysis of funding patterns and recipients, open reporting on that analysis, and continued efforts when patterns don’t change. 

“Asheville is exemplary and emergent in that many organizations work together to support female- and BIPOC-owned businesses,” Muntean said. “Being a great place to live and move to, there is a diverse community here from all over the country. Asheville is a gem in the rough, and can really be a model for other small- to medium-sized cities trying to build inclusive, vibrant ecosystems with available capital and support.”