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Amanda Kramer: Every episode, we have an LBIdea or a key takeaway. And the key takeaway here is that entrepreneurship is a social process.

Welcome to the Leeds Business Insights Podcast, featuring expert analysis to help you stand out from the herd. I'm your host, Amanda Kramer. We are thrilled to be discussing innovation and inclusivity in entrepreneurship with Ethan Poskanzer, assistant professor at the Leeds School of Business.

Welcome to Leeds Business Insights, Ethan, and thank you so much for being here today.��

Ethan Poskanzer: Thank you. It's good to be here. It's good to be part of Leeds, in general, and on this podcast. So, thank you.

Kramer: We're looking forward to learning from you. And let's start here — so some of your research, Ethan, has centered around the notion that people have ideas all of the time, but it's hard to make them actionable. Why do some ideas come to life and not others?

Poskanzer: Some of those that I would say are, people are born in situations where they don't have access to others who could guide on that process. So, there's a notable paper by Raj Chetty and colleagues that American inventors tend to be the children of other American inventors, and they tend to invent things that are pretty similar to what their parents invented.

And a lot of the idea behind that is that, through these connections that they have they learn on things from their background, from growing up, from their parents, so, there's a knowledge pathway that goes through. There's also a pathway to connections. If you're in Silicon Valley, it might be easier to get access to funding than if you're in rural Kansas. There are programs that reach some people and others, like, accelerators and incubators.

Education is a big thing, so most inventors do go through the higher education here in the United States. Obviously, access to higher education is not equally distributed across the country.

So, there are a lot of reasons. I tend to focus on those, which are about access to social relationships and how having access to certain social networks is more conducive to getting an idea off the ground than others. But there are a whole family of others that are about individual characteristics and perseverance and things like that for why some entrepreneurs are successful and not others. But the word I'm intent to be about — access to connections, access to social relationships, people who can help you, things like that.

Kramer: Mm-hmm, great. Well, let's dive into your world. One piece of making ideas actionable is this notion that you've mentioned of leveraging social networks and mentors. Tell us more about what you've learned in this space and how that resonates with turning ideas into action.

Poskanzer: So, there is an organizational form called an accelerator, which are common in Colorado, like, Techstars was founded in Boulder, but Techstars is not the only one of this kind. And these are organizations that serve what I view as an important gap in entrepreneurship, which is that, they give entrepreneurs a little bit of funding, some access to mentors, and most importantly, they give them time and a place to be while they're figuring out, is this idea going to get off the ground? They give them some runway to try and get things going.

And a big thing that those programs do is they connect entrepreneurs to mentors. And the idea is that these mentors have the type of knowledge that a lot of entrepreneurs wouldn't have, especially if you're a first-timer. So, you might not know about how to do certain processes, you might not have connections to meet potential customers. And these mentors are supposed to supplement the entrepreneur's social network and give them the connections they wouldn't be able to otherwise access.��

So, that's actually more general to what we've experienced in organizations. That's how scholars are produced, so graduate students are paired with advisors. But I think there are also still a lot of open questions about why some mentoring relationships work and others don't.��

Kramer: Mm-hmm. Absolutely, it's very complex. You had some interesting findings about the difference between entrepreneur-selected relationships and advisor-selected relationships when it comes to mentorship. Tell us what you learned.

Poskanzer: Yeah. So, the first step that we went into was we were looking into matching algorithms and mechanisms and matching processes to try and leverage the mentors and the entrepreneur’s knowledge of themselves into making these matches.��

So, really, we started around this was the entrepreneurs know about what they need, but they don't necessarily know about every mentor and how they can help them. So, they might know that “I need somebody who knows about how to write a specific grant for NSF, and I'm having a hard time learning the format,” but it's pretty hard to tell who can offer that kind of help.��

Meanwhile, the mentors know all this stuff about what they can do. And it's usually not all on their resume or not all on their career background. And your career background says, you worked in finance for four years and then you, you know, got a PhD and you did this stuff, but, like, nobody really knows, like, your underlying skills.

And the idea that we had is that these are the two pieces of knowledge that need to be combined to successfully match entrepreneurs and mentors, but nobody really has that full picture. So, the first thing that we started looking into was whether putting more weight on the entrepreneur's knowledge of the problems or the mentor's knowledge of the solutions so that they could offer whether one of those was more conducive to finding successful matches.

And we found pretty strong and consistent results that relationships that were chosen by the mentee ended up being much more valuable. They persisted for a lot longer. The entrepreneurs who were able to select their own mentors ended up doing better in a pitch competition later on and winning more money. So, we have evidence that they, actually, were meaningfully doing better, you know, in their overall trajectories later on.��

And that's, kind of, interesting because the prior would be for… you know, one way to think about a prior expectation, the mentors know how to do this, they've done this before, the entrepreneurs are first timers. So, you can imagine when a lot of organizations put together a mentoring program, they're probably more likely to ask the mentors what they think about how to do this than to ask the mentees. The mentees are, kind of, there like in like a novice-ish-role. They need help. But what we found is that they were able to assess the fit better. And we found contextual evidence, basically because they knew what they needed. You know, they had a pretty decent sense for like, "I'm doing well here, but this area I really need help building. I like, don't know how to pick what salesperson to hire of,” and they knew the specific ways is.

There's another layer to this where it's a search problem, right? So, it's about finding the right pairs. The person who needs help is more motivated to search harder, unless they dug harder and they found better matches, because, you know, like, they needed this and the mentors didn't.

Kramer: Mm-hmm, absolutely. And Ethan, as we talk about this and talk about the fact that more successful mentorship relationships start with the mentee, do you have advice for entrepreneurs out there who are starting to look for a mentor? Where do they start? And what can they expect their mentor to bring to the relationship?��

Poskanzer: So, the first thing I would say is that the entrepreneurs tended to have a pretty good sense of what they needed help with, where I think could be easy when an entrepreneur meets mentors to be deferential to what they think the mentor needs help with. But we found that, in general, the entrepreneur has a better sense for which problems that are most needed to be solved.��

So, one thing that I would encourage entrepreneurs to do is to stick to their convictions about what they need help with and to reach out to people who they think can help them, because they know what's going on under-the-hood more than other people do. Obviously, the mentor's advice knowledge is super helpful, but we at least find evidence that the entrepreneur feels like they have a problem and that's a good sense.

The other thing we found is that… so, this program that we studied had some mentors who were well-known, and that they were seen as the higher status, in some way. We didn't really actually find any correlationship between being a well-known mentor and the likelihood that they formed successful relationships.��

So, what we found is really that there wasn't evidence of that mentors had, like, a certain quality to them, that there was quality differences, where some mentors were better than others that the well-known mentors were better than the mentors who weren't well-known. It all depended on their fit with a particular entrepreneur.��

So, next thing that happens is when an entrepreneur gets into a situation where they have access to a couple of mentors, they usually want to get in-touch with what's called, like, a superstar mentor or somebody who has, you know, more renowned in their area. So, we didn't, we didn't find a lot of evidence that that's a good strategy. We found evidence that good mentoring relationships had very specific complementarity.

So, it was not about finding the best mentors, in general, it was about finding the mentors who could help with really, really specific problems the entrepreneur had. And so, that means, also, that like the mentors weren't really able to teach the entrepreneurs, like, how to do things in general. We found it went better when they came in with something like really specific that they needed help with. So, like examples that we had where, like, I mentioned a grant process before, entrepreneurs who needed help writing a specific grant, and they found somebody who could help do that versus somebody who could help them build their ideas in general.

Because that large feedback needs to come from customers in the market, not necessarily one mentor. Like, one mentor can maybe give you advice, but to, like, overall shape the business, that needs to come from customers. Other ones, we had an entrepreneur who needed a referral to a specific person in a very specific role in hospital administrations. They were able to back out mentors who could make that connection for them. But they added with a really specific need from the mentor, and they were able to find that, versus going in, kind of, generally and sitting down and saying, like, “I need some help.”��

Probably, my favorite one that's an example of how specific this gets is one entrepreneur managed to find a mentor who had negotiated with the exact same person that the entrepreneur was negotiated with, and had got advice about, like, that counterparty's, like, personality and tactics and things and like guided them through the process. So, it tends to go better when it's very actionable.

Kramer: Wow, very specific and actionable. Thank you so much for those examples, Ethan. Another part of your studies is looking at gender differences. And so, I'm wondering, did you find anything in terms of how mentorship differs for men and women?

Poskanzer: Definitely. So, we found some pretty striking results about gender. So, we found that the entrepreneurs, when they entered the program, were not more likely to request to work with or reach out to mentors of their gender. So, they didn't… men were not more likely to request to work with men; women were not more likely to request to work with women.

But when we look at the program later on, there was substantial gender sorting — so men ended up working with men more, and women ended up working with women more. And we found evidence that that is because the mentors invested more in entrepreneurs of their gender. So, the mentors offered more help.��

It was, it was specifically men mentors tended to offer more of certain types of help to men entrepreneurs. And then, as the entrepreneurs were learning about which of these relationships are worth continuing? Which of them am I going to cut out? They were more likely to cut out the ones with somebody of another gender, and they ended up sorting into a network that was haemophilus by gender, which “haemophilus” is a social science term for when people form more relationships with others like them.

That is something that we are still working to turn off. You know, like, the idea that men don't invest as much in women entrepreneurs is, obviously, not anything that anybody's happy about, and we are starting to do research into ways to counteract that, but it is, I think, valuable knowledge to have out there.��

Kramer: Thank you so much for sharing that information, Ethan. And I want to stick with gender for a moment, but switch to another part of entrepreneurship, which is startup funding and pitch evaluation. Let's start with what you've learned about female-oriented ideas in terms of startup funding and pitch evaluation.

Poskanzer: Yeah. So, pitch evaluation, I think, is a useful way to think about a more general process, which is that, when an entrepreneur is trying to get their idea off the ground, they need to get buy-in from a lot of different people. And they need to basically convince people that their idea is good and worth investing in with just a little bit… And then, this happens four million pitches, but also, you know, generally. Like, if you're at work and you have a new idea about how to do something, you need to get your boss on board with it, and you basically do what's similar to a pitch where you try and convince them, like, "This is a good idea. This is why it's worth to you, you know, letting me spend two days a week trying to do this new thing.”

But pitch competitions are empirically useful, because they're quantitatively recorded, and there's money at stake, and they're a good way to analyze these processes. And so, what we found specifically was an interaction between gender and a gender-oriented idea. And it's specifically in and around where entrepreneurs are pitching to a set of judges and the winners are going to get funding.��

And among very male-oriented ideas, which we study by the topical domain, so examples of very male-oriented ideas are hardware and robotics or cybersecurity or storage, by this measure. So, among very male-oriented ideas, we don't see strong gender differences and evaluations. But among very female-oriented domains, which are retail, art and fashion, social impact, some health-oriented technologies, women are evaluated much worse in those, in the more female-oriented domains than men are. And so, we measure the male-female orientation domain by the representation of male and female entrepreneurs in that domain.��

Kramer: Do you have any ideas, Ethan, about how women can better compete for startup funding, given this information that you've shared?

Poskanzer: It's a hard question, especially because there's a lot to think about, like, where to assign responsibility to this to. I mean, we have focused more research energy on trying to design more fair evaluative processes rather than thinking about the actions, as much of the entrepreneurs themselves. I hope we can make progress on putting some ways out there that these processes can be designed more fairly.��

Kramer: You also found a significant difference in the referral space. First of all, tell us why referrals to funding are important for an entrepreneur and what you found in terms of gender differences.

Poskanzer: Totally. So, referrals are a big bottleneck in entrepreneurship and a big family of that is referrals to investors. So, when an entrepreneur is out there and they have an idea, one of the hardest things that they have in front of them is getting investors to hear their pitch, or if they have an idea that is something, a medical device that a hospital could use, is getting in front of the person who could make the decision to buy their product.

And that can be hard for people to access, especially people who are from backgrounds who don't have those connections, maybe outside major cities, maybe people who didn't go to elite universities, things of that nature.��

So, getting into those conversations is a huge deal. And mentors are a big way that entrepreneurs often make those connections. So, in accelerator, a huge thing is that it will introduce entrepreneurs that they think are promising to investors that they know about, or to people in their own networks to help them get that face-time with people that are important to them.��

So, sometimes they enroll in these programs just to get those referrals. That's, like, their main objective. And we found that those, to a really large degree, go through gender lines. Women `mentors are about equally likely to make a referral for a man-entrepreneur or a woman-entrepreneur, but men mentors were much more likely to make referrals for men.��

So, that meant that, through those same-gender relationships, men had greater access to this super coveted resource of introductions to investors and the opportunity to pitch their businesses for funding. So, in the program, we studied about five to one difference.��

So, a man mentor was about five times as likely to make an introduction when paired to a male entrepreneur than if he was paired with a female entrepreneur, which is a huge difference in a really important step in an early-stage startup getting off the ground. Because, you know, for early-stage startups, that first funding round can be the difference between running out of time and having another year to invest in the business.

Kramer: Absolutely. One other piece that you study, Ethan, is this idea of idea selection and the kinds of ideas that end up being favored and funded. What have you learned? What can you share with us?��

Poskanzer: So, I would say the biggest idea that, I think, we've uncovered in this domain is that the lens that the evaluator is using has a pretty big impact on which ideas are being picked. The way we get at that is we do this study where we look at a multi-stage sequence, a multi-stage evaluation process for funding for entrepreneurs.

So, they pitch for funding, but they don't just go right into pitch for funding, you know, like anything, they do a screening first and they do another screen, and then eventually they do the final stage. And so, that's, kind of, like, a job interview. When you do a job interview, first you get a phone call, where what the evaluator's doing as they're deciding, "Is this person good enough to interview again?" And then, you'll do another phone call. Maybe, this time you go to the office in person and say, "Is this person good enough to make our short list?" And then, after that, somebody will decide who gets hired.��

So, we find, in those first stages, when the evaluator is just deciding, should this entrepreneur be included to keep going, women actually do better. So, women are more likely to be included, they're, kind of, focused on inclusivity at that point. But then, in the last stage, they're no longer focused on who's being included in the group. They're focused on who's going to be the winner. So, who are we going to publicly say is the winner of this process? Who is going to actually get this money? In that case, the women do worse, even though it's the same women who just did better two weeks ago in the screen before.��

So, it's not like the businesses have changed at all. The judges are drawn from the same pool. The evaluation is done with the same rules but, kind of, the hat that the evaluator is wearing, you know, "Am I picking winners or am I picking people to be included?" shapes the gendered outcome of the evaluation process. And I think that's a pretty broad phenomenon, so, when we think about how are we going to pick these ideas, exactly what you define as the objectives for what you're trying to do, can introduce inequality into the ideas that actually get picked by that evaluation process.

Kramer: Thank you for sharing that information with us, Ethan. While we're on the topic of pitches, for those out there listening that may be preparing for a pitch, it turns out that the order that you pitch in may matter. Tell us what you've learned about pitch-sequencing.

Poskanzer: Pitch-sequencing, this is research that has been done a few ways. It can be disadvantageous to go first. And it can be hard to go first. And the order matters even when it's randomly generated. It can also depend on the quality of who's pitching around you. So, we observe some evidence that there's an ecological pattern here, where entrepreneurs that pitch after somebody who's really good, tend not to get evaluated as really, very well. And if you pitch after somebody who is not so good, you tend to look right after that.��

And this is part of a normal benchmarking process that we would see in some other areas where, when you're trying to do something that's not obvious, so decide whether an entrepreneurial idea is good or not.

There's no really easy way to do this. It's very subjective. People tend to think in benchmarks. So, when something really clears the last benchmark that you saw, it seems great, and we all see evidence that a really good idea can shine out some others.

Kramer: That's really interesting. I want to loop back to where we started but tackle it from an organizational perspective, because some of your work you've done is you've researched how organization affect people's social networks, and how they can put people in a position to make the relationships and connections that they need to turn their idea into a reality. Tell us more about this.

Poskanzer: I think we found a few things that organizations can do in that regard. So, big one would be to give those people some discretion over who they work with, to let them be the guide to what kind of help that they need. And we see some value in learning that is unsupervised by the organization of letting people organically, sort of, into relationships that they think are useful versus a top-down organizational structure, that's you work with you, you work with you, so on and so forth.��

The other is that specifically with regards to gender; we see value in making sure that the mentor-pool is at least as diverse as the pool of entrepreneurs. So, as we said before, we observe some evidence that mentors invest more in mentees of their gender. That's, kind of, consistence, something we see with manager-employee relationships as well. And so, something that, if an organization is concerned about creating an equal playing field for the people that they're the mentees, that one thing that organizations can do.��

I mean, they can try to turn the bias off, which is also a great thing to do. We're testing ways to do that, but something that we know that they can do now is to help everybody try, and at least have access to relationships with people who are similar to them, if those are relationships that they choose.

Kramer: Great. Really appreciate those takeaways for organizations or people who work at organizations that are listening in. Every episode, we have an LBIdea or a key takeaway. And the key takeaway here is that entrepreneurship is a social process.

Poskanzer: Whenever something is very uncertain, it can be really hard to tell what's a good idea or not. And people see that, through their own lenses, and people can put their own opinions, beliefs about what's an idea, and those are make a difference in which ideas get picked and which don't. And then to the extent that certain biases are embedded in who would make a good entrepreneur, which types of entrepreneurs, which types of people are suited to develop the best ideas those biases can distort the process of getting ideas to the surface.��

And I think that's something important to keep in mind that an organization is designing a process to select new ideas to fund an investment that you think of. We need to be really careful about defining the criteria that we're going to use to select this. And we need to be careful about which judges we're picking and how they view things, and they also need to be careful about the candidates that we're looking into investing in, you know, how can we give them the resources that they need to get their ideas off the ground? Because some might have better access to things, like, mentorship than others. And that can make their ideas look better at the end of the day than the ones who had a tougher road ahead of them.

Kramer: Love it, Ethan. You brought it all together. So, thank you, Ethan, so much for joining us today.��

Poskanzer: Yeah. Thanks for having me. This has been great. And thank you for having me at Leeds in general. It's good to be here.

Kramer: We're so glad to have you.��

Thank you again for listening to Leeds Business Insights. Don't miss a single episode, subscribe to Leeds Business Insights wherever you get your podcasts. You can also find more information about our podcast series at leeds.ly/LBIpodcast.

If you’ve enjoyed this episode, you may also enjoy Creative Distillation, an entrepreneurship research podcast from the Leeds School of Business. Check it out at pod.link/creativedistillation. Leeds Business Insights Podcast is a production of the Leeds School of Business and is produced by University FM. We'll see you next time.