Building Smarter Systems to Address the Elephant in the Due Diligence Room: Discrepancies in Startup Evaluations


Nathaly Botero


Startup investors not only have a privileged front-row seat to the innovative ideas that are transforming our world, but they also play a role in deciding which solutions to scale through their investments. That’s a lot of responsibility. Yet, multiple studies suggest that there are discrepancies in how investors evaluate men-led and women-led startups, leading them to overlook an abundance of promising startups—specifically women-led startups (those with at least one woman on the founding team).

Women-led startups aren’t the problem

In 2021, 85.4% of venture capital went to startups with only men on the founding team (PitchBook Data, Inc) – this financing gap has hardly budged in the past decade. Contrary to common misconceptions, research has found that women-led startups’ quality, investability, and availability are not the issue.

Multiple studies, including our own, have found that the gender composition of the founding team is really the only difference among similar-quality startups’ success in fundraising. In our study, we ruled out common explanations for the difference in funding – different levels of experience, or representation in different sectors – as reasons to explain the gap among accelerated startups.

In partnership with the the IFC (International Finance Corporation), the Women Entrepreneurs Finance Initiative, the World Bank Gender Innovation Lab and academic researchers Amisha Miller (Boston University) and Saurabh Lall (University of Glasgow), we ran an experiment that sought to improve evaluation frameworks to reduce discrepancies in evaluation processes  and increase the accuracy of investment assessments. Below are the main takeaways.

Three steps to make evaluations more consistent, comprehensive, and data-driven

We conducted a randomized controlled trial (RCT) where we randomized participants into control and treatment groups. Those in the control group used Village Capital’s standard investment evaluation framework. In the treatment group, we added the following three steps to the standard evaluation framework:

  1. Collect information on each startup’s both risk and growth opportunities to ensure a comprehensive understanding of both
  2. Assess a team’s potential by evaluating how much they have demonstrated an ability to improve their startup
  3. Predefine what criteria will most heavily determine their assessment of a company.

*Learn more about how these three steps mitigate discrepancies and how they were added into the evaluation process in the Key Insights Report.

Note that these steps did not have investors specifically think about the founder’s gender. They were simply designed to reduce discrepancies by targeting the areas that lacked structure. In other words, they made assessments more comprehensive, data-driven, and consistent.

The difference in how investors evaluate startups in the control and treatment group revealed that investors, on average, undervalue women-led startups and overvalue men-led startups:

  • When investors used an evaluation framework to score startups (control group), the scores they gave men-led startups decreased compared to when they scored them without one. This suggests investors, on average, overvalue men-led startups. Women-led startups’ scores saw little change and were lower than men-led startups’ scores.
  • Investors who integrated the three steps (treatment group) reduced, on average, the overvaluation placed on men-led startups and improved their evaluation of women-led startups. Women-led startups’ scores, on average, increased 5x compared with the control group, a notable and statistically significant improvement. This suggests that women-led startups, on average, are undervalued.

Note: We did not find a difference between the behavior of women and men investors.

As a result, our findings suggest that investor evaluations can often fail at accurately scoring and identifying promising women-led startups. They also provide strong evidence that evaluation frameworks often lack accuracy and can, in fact, be improved in order to more accurately assess a startup’s potential.

Building a smarter system

In sum, the issue is not that there are not enough promising women-led startups. Rather, it is that the processes investors use to identify startups are not set up to accurately identify all opportunities. Given the key role investors play in making the innovations of tomorrow possible, they must not – and cannot afford to – underestimate the role their systems play in identifying promising opportunities.

In addition to our Key Insights Report, we published two action-oriented implementation guides for investors and for incubator/accelerator leaders. These guides focus on concrete additions investors and accelerators can incorporate in their own investment processes and programs to help foster more accurate evaluation.

Effectively identifying and supporting innovators requires the ecosystem to innovate its own systems. We hope that our research, combined with our toolkits, can do just that, and help unlock more capital for women-led startups.


A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training


Nathaly Botero

Innovations Manager at Village Capital

As an Innovations Manager at Village Capital, Nathaly Botero works on projects focused on developing new insights and solutions that can better support entrepreneurs, increase their access to capital, and strengthen the startup ecosystem. She’s passionate about the intersection between research and practice and is particularly interested in developing strategies to support entrepreneurs solving the world’s greatest challenges. Prior to joining Village Capital, Nathaly worked in technical assistance at an impact investment fund in Latin America and served as a consultant in peace-building projects in Colombia.

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