(posted on behalf of @Julian Riano)
A key stage in entrepreneurial processes is the pitch, where a business idea is presented to friends, family, and relevant others to gain feedback shaping the idea; however, not every piece of feedback is as useful or acceptable as it could be. Initial assessors of business ideas, known as relevant feedback providers (e.g., business owners, professors, community leaders, etc.), play a vital role in encouraging/thwarting idea elaboration and further development during pitches. Reasons for the significance in impact stem not only from their role but also due to other more innate characteristics such as race and gender resulting in almost inevitable biased feedback. With the aim to provide answers as to why only 2-3% of startups established by White women and Black entrepreneurs received VC funds in 2022-, Dr. Saggi Nevo investigates how race and gender influence entrepreneurs in their business idea development phase in his recent study titled “Atypical entrepreneurs in the venture idea elaboration phase”.
Challenges of being an entrepreneur include among others, taking the first step whether it is leaving a job or approaching someone with a pitch, being patient – as success does not happen overnight, shortage of cashflow, time management, delegating, and balancing progress with perfection. However, White women and Black men and women, among other minorities – known as ‘atypical’ entrepreneurs, face additional hurdles. According to the 2020 British Business Bank report, White men entrepreneurs received 67 per cent approval for loan applications compared to only 40 per cent for White women and 39 per cent for Black men and women entrepreneurs. Well-known organizations like the Federation of Small Businesses (UK), Lloyds Bank (UK), and Aston University’s Centre for Research in Ethnic Minority Entrepreneurship (CREME), have also recognized challenges for minorities suggesting entrepreneurship is a predominantly White man domain. Moreover, Dr. Nevo’s findings suggest relevant feedback providers assessing business pitches delivered by White and Black women may provide biased feedback because they are most likely to be White men who may perceive those individuals as incongruent with entrepreneurship. Avoiding biased feedback might be difficult because there are a few or unavailable judges from ‘atypical’ social groups able to provide the less-biased feedback the nascent entrepreneurs need in this early phase.
Despite available feedback structures to minimize bias, judges still build stereotypes of potential entrepreneurs based on gender, race, and age which clouds vision, and quality of feedback provided, even undermining the development of business ideas. Dr. Nevo identifies two dimensions in the stereotype content model – namely, warmth and confidence – to suggest whether outsiders, in this case ‘atypical’ entrepreneurs, presenting their ideas, are seen as allies/collaborators or rivals/competitors. Providing feedback, according to Dr. Nevo, could come in three types: verifying – affirming the idea is feasible and strategies and behaviors are entrepreneurial; challenging – identifying flaws and product/service-market fit; and expanding – providing entrepreneurs with suggestions, guidance, and some form of encouragement for their idea to flourish. Findings in his study, on one hand, confirmed race as an influencer factor (e.g., Black women were considered as colder and less competent compared to the same woman in a ‘typical’ career whereas White women were considered to have lower competence but higher warmth than Black women) and confirmed White men would receive more verifying and expanding feedback compared to Black women who would receive mostly challenging feedback. Whilst on the other hand provided a glimpse of hope by identifying that a positive ‘Inner’ Ingroup Consensus would lower the influence of stereotype bias on feedback provision during business pitches.
The stereotype component model is applied to theorize feedback could take different forms due to the innate characteristics (e.g., gender, race) of both parties—namely, the nascent entrepreneurs and relevant others. Gathering data from the crowdsourcing platform Prolific, two sets of hypotheses were tested in two studies: the first study tested the hypothesis that a woman (either Black or White) with an entrepreneurship intent was perceived as stereotypically ‘colder’ and/or less competent compared to a situation if she were to apply to a more ‘typical’ career. The second study tested whether a Black woman would receive primarily challenging feedback, whether a White man would receive primarily verifying and expanding feedback, and whether a White woman would receive primarily challenging and expanding feedback. The ‘ingroup-outgroup’ characterization, according to Dr. Nevo, is also a representation of willingness to help which based on the study, suggested that White men would be less likely to help Black or White women entrepreneurs than a fellow White man entrepreneur.
Moreover, in our informal discussion and through relatable personal experiences, Dr. Nevo and I agreed on the existence of positive/negative discrimination on the basis of accent. Allegedly, some US-based companies prefer to hire people with Northern or Midwestern accents as people with Southern accents are considered to be less competent and that customers’ acceptance may not be as high. Whether this type of bias carries over to entrepreneurship is a subject for further study.
Despite a number of studies recognizing feedback’s vital role during business idea development, enhancement, and deployment, only a few studies, including Dr. Nevo’s, highlight the existence of biased feedback on the grounds of race and gender. Results from his study demonstrate a need for structural changes across business schools and incubator hubs. Entrepreneurs from different races, age groups, genders, and backgrounds ought to be able to trust relevant feedback providers that they avoid favoritism by providing verifying, challenging, and expanding feedback based on the quality and soundness of the business pitch and not on entrepreneurs’ social identity or demographics.
Regarding the data collection process, Dr. Nevo placed particular emphasis on making sure selected participants were former/current entrepreneurs. The experimental design, which involved a one-time feedback request from a previously unknown ‘individual’ and which provided no opportunities for reciprocity was similar to helping a stranger. Concerning the revision process, Dr. Nevo acknowledged the valuable comments from the editor who suggested the theoretical focus should be narrowed by selecting specific elements within the theory to which his study was contributing to provide a clearer focus for presenting results and development of conclusions. As our chat drew to a close, Dr. Nevo suggested for relevant feedback providers to engage in exercises to develop awareness of their own biases whilst implementing steps to minimize stereotypes and ensure transparency and impartiality when providing feedback, particularly to atypical entrepreneurs.