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Financiers prefer to back entrepreneurs who are similar to them. This seemingly innocuous tendency creates problems for society, but the solution is difficult to make work, says Scott Shane

If you're an entrepreneur looking for money, you probably have a list of factors that you've heard increase the odds that someone will finance your business. But here's one you might not have considered: homophily.

For those of you who do not spend your spare time reading sociology textbooks, homophily is just a fancy word expressing the birds-of-a-feather-flock-together cliché.

Sociologists have found homophily to be very common. Studies show that rich people want to associate with other rich people. Lawyers like to be with other lawyers. Doctors prefer to hang with other doctors. And people of the same gender, race, and/or ethnic group tend to favor each other's company.



To read the full, original article click on this link: Overlooked When Raising Capital: Investor Preferences - BusinessWeek

Author: Scott Shane