For founders of companies, appealing to funders can be everything – and that often means projecting a masculine image.  In a recent article, we coined the term “venture bearding” to describe this phenomenon, a tactic that can make the difference between raising capital and laying off employees.

To understand why, consider that investors  feel most comfortable with people like themselves, and that the vast majority of investing partners at venture capital firms are men. It’s no surprise, then, that in 2018, all-female startups took in only 2.2 percent of venture capital dollars.  Women-led startups that did close deals averaged only $5.9 million in deal size, while men-led startups raked in $17.3 million on average.

Investors also look for founders who resemble those who have been successful in the past – again, largely young white men.  Something as simple as a deep, masculine voice can shift the odds of attracting funding. One study found that when investors heard otherwise identical pitches voiced by men or women, investors preferred the man.

Presenting the right identities may also outweigh close, critical reviews. Consider Elizabeth Holmes, the recently indicted founder of Theranos.  Flanked by a board featuring retired military officers, she presented herself as almost a clone of  Apple founder Steve Jobs—aping his wardrobe  with a black turtleneck sweater. Her costume was often complemented by a blazer’s broad shoulders, and she spoke with a startlingly deep voice.  The presentation exuded a hard-charging masculinity, allowing backers to see her as a Jungian fantasy of Jobs’ second coming.

Savvy startup founders watch how and to whom capital flows.  Since identity and presentation matter, founders will work to show investors what they want—whether investors would consciously admit it or not.  One female founder described herself as essentially pitching in drag—presenting a masculinized caricature to collect cash.

Founders use different strategies to present more masculine images.  For example, a founder may downplay her identity and incorporate more sports metaphors and aggressive rhetoric to put male venture capitalists at ease.

Other strategies take women out of the room entirely. With what we term a “substitution” strategy, the true founder designates a man as a cofounder mostly so that she can send in her male marionette to raise capital. This puppet-show dynamic imposes enormous costs on female founders.  They surrender additional equity just to get their ideas a fair hearing. Although these strategies obscure women’s contributions and reinforce dominant norms, we cannot condemn founders for using them to fight for capital in a fundamentally unfair environment.

Another strategy, one we term “manclusion,” involves including men in meetings simply to induce better behavior from the men on the other side of the table. For example, Janica Alvarez, the CEO of Naya Health, a breast pump manufacturer, adopted a manclusion strategy after investors looked at porn during her pitch meeting.  She started bringing her husband along to pitch-meetings to induce decent human behavior from investors.

Manclusion strategies have been used in other contexts as well.  The strategy is familiar to women who have copied trusted men on email exchanges with creepy colleagues or hauled men along as patriarchal props to automobile repair shops.  Notably, the dynamic works one way.  Men need not bring women from their own organization to productively interact with outside women.  Men actually benefit, getting dragged up into meetings gaining access to opportunities whenever a woman needs some totemic masculine presence.  In contrast, men pitching their own startups face no similar incentive to share the limelight with women.

When sophisticated investors recognize that the current status quo overly rewards masculine identities, it suggests a different play.  Because women with promising ideas struggle to raise capital, smart investors may collect outsize profits by allocating more capital to women and minorities.  This strategy allows funds to avoid competing to invest in over-valued startups with all-male cofounders.  Greater returns on investment may come from seeing and seizing the opportunities overlooked by investors blinkered by their bias.  Today, some venture capital funds and accelerators, including Backstage Capital, already explicitly embrace this approach.

Still, we remain skeptical about whether market forces alone can correct an environment that now forces founders to contort themselves.  If raising awareness fails to drive change, public intervention may be necessary to create equal opportunities.  Ultimately, the venture bearding behaviors that allow women to access capital also mask their presence.  As long as women lack visibility, venture capitalists will fail to confront their biases, and women will continue to cloak their identities to raise capital.

This post comes to us from professors Benjamin P. Edwards and Ann C. McGinley at the University of Nevada, Las Vegas, William S. Boyd School of Law. It is based on their recent article, “Venture Bearding” available here. The article was also featured on The Hill.