Gender bias in venture capital means identical business cases are evaluated and funded differently

“Venture capital funding should be allocated to the “best” business cases. But Ana Barjasic and Dario Krpan show how evaluators’ bias means that companies run by women are overlooked and underfunded compared with those presented by men. In Europe, where public funding is common, this is a particular problem. Venture capital continues to operate on the assumption of meritocracy: the best ideas, presented by the best founders, should win. Yet when identical business cases are evaluated by real investors, a different pattern emerges. The processes through which “the best” is identified remain largely unquestioned, even though they are shaped by underlying biases at the individual, institutional and systemic levels. This tension is particularly relevant in Europe, where public funding plays a dominant , if not quasi-monopolistic, role in startup and innovative entrepreneurship support. Principles of excellence hold a near-dogmatic status, while the mechanisms through which excellence is evaluated are rarely scrutinised. Gender bias in entrepreneurship and investment is not a new phenomenon. Persistent disparities in funding allocation and participation continue to define the landscape, with women founders receiving only a marginal share of venture capital. Research shows that less than 2 per cent of global venture capital goes to women-led startups. At the same time, women entrepreneurs are still constructed as the “other entrepreneur” , at best, and evaluated against an entrepreneurial archetype that is implicitly male. Often this happens even before the actual assessment of the business case begins. Previous research has shown that investors are more likely to invest in men entrepreneurs even when identical business ideas are presented. Our new research goes a step further by systematically testing bias across multiple levels, including investor decision-making and policy interventions. The studies draw on controlled experimental designs with identical business cases, evaluated by over 200 real, active early-stage investors. The sample consists predominantly of European early-stage investors, which makes the findings particularly relevant in a European policy context. Participants were asked to allocate different types of venture support, ranging from mentoring and training to grants and equity investment, and to assess investment scenarios under different conditions – including the presence of gender quotas. The results reveal a consistent pattern Investors are more likely to allocate financial support to men-led companies, while allocating mentoring and other non-financial support to women-led ones. This happens even when the underlying business case is identical. This difference is not marginal: financial support is selected significantly more often for men-led ventures, while non-financial support is disproportionately assigned to women-led ventures. For example, among men investors, 56 per cent selected financial support as their first choice for men-led companies, compared to 38 per cent for women-led companies. At the same time, 53 per cent selected non-financial support for women-led companies, compared to 35 per cent for men-led companies. In this context, bias not only affects whether support is provided, but also shapes the type of support that is considered appropriate. In practical terms, this means that two identical ventures are not only treated differently, but are placed on different developmental paths from the outset, with one receiving capital to scale, the other receiving preparation to become investment-ready. Importantly, this pattern is not limited to men investors. While more pronounced among men, similar allocation tendencies are observed across the sample, indicating that bias operates through shared evaluation frameworks and social realities rather than individual attitudes. This helps explain a widely observed phenomenon in the entrepreneurship ecosystem: women are often “over-mentored and under-funded”, a pattern we clearly identify in our experimental findings on how investors allocate financial versus non-financial support. Our review of policy initiatives targeting early-stage women entrepreneurs in Europe shows that around 80 per cent focus primarily on mentoring, training and networking opportunities, while relatively few provide substantial financial resources. Even when funding is included, it is often limited in scale and unlikely to address early-stage financing constraints in a meaningful way. This is not just a gap. It is a structural misallocation Funding is constrained, while mentoring is used as a substitute. As a result, responsibility for overcoming structural barriers is shifted onto entrepreneurs themselves, instead of being addressed through access to capital, often cascaded through public institutions, where the standards for fair and unbiased allocation should be higher than they currently are. At the same time, gender quotas have emerged as a frequently debated policy tool. Our findings show that introducing gender quotas does not uniformly increase investors’ willingness to invest in women-led companies. Responses vary depending on the design of the quota and the investor’s gender. No significant differences are observed in scenarios without a quota or with a 10 per cent quota. However, women investors are more likely than men investors to invest in women-led companies under more demanding conditions, particularly in scenarios involving a 30 per cent quota or quotas combined with incentives or penalties. In contrast, men investors are less responsive to these mechanisms, and in some cases even less willing to invest as quota pressure increases. In this context, public funding does not merely complement the market, but actively shapes it. Through fund-of-funds structures , co-investment mechanisms and eligibility criteria, public institutions influence how capital is distributed and which ventures are considered investable. When such systems rely on evaluation frameworks that are not regularly audited for bias, they risk reinforcing the very disparities they aim to address. Questions about accountability If public capital is deployed through intermediaries, but the evaluation criteria remain opaque or weakly standardised, it becomes difficult to assess whether funding decisions are truly merit-based. Without systematic auditing of these processes, claims of excellence risk becoming self-reinforcing rather than evidence-driven. These patterns also raise important questions about what is meant by “investment readiness”. When women-led ventures are systematically directed towards mentoring, training and preparation, the threshold for being considered “ready” for funding becomes both higher and more ambiguous. At the same time, men-led ventures are more readily perceived as investable under comparable conditions. “Investment readiness” is not just about venture quality – it is shaped by how signals are interpreted through existing evaluation frameworks. In practice, identical business cases are evaluated differently and funded differently. Change the water, not the fish Unconscious biases require unconscious solutions, grounded in behavioural science principles, through structured assessments, standardised evaluation criteria and debiasing tools that shape how decisions are made. Importantly, gender-focused interventions should not be interpreted as lowering standards. Rather, they aim to correct for structural biases and ensure that merit-based evaluation can function more effectively. Equity and excellence are not competing objectives; they are complementary. The idea that when the water in the aquarium is dirty, the solution is to “change the water, not the fish” is a convenient metaphor for the system itself. In venture capital, the issue is not the entrepreneurs, but how decisions about them are made. This article gives the views of the author, not the position of LSE Business Review or the London School of Economics. You are agreeing with our comment policy when you leave a comment. Image credit: People Images provided by Shutterstock. The post Gender bias in venture capital means identical business cases are evaluated and funded differently first appeared on LSE Business Review .

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