Can Access to Capital Explain the Entrepreneurship Gender Gap?

40 Pages Posted: 17 Apr 2017  

Michael Ewens

California Institute of Technology - Division of the Humanities and Social Sciences

Richard R. Townsend

University of California, San Diego (UCSD) - Rady School of Management

Date Written: April 14, 2017

Abstract

It has been well-documented that women are underrepresented among entrepreneurs funded by early stage equity investors and these investors are predominantly men. In this paper, we explore whether investors play a role in explaining the gender gap in entrepreneurship. To do so we use a unique dataset obtained from AngelList, which allows us to observe detailed investor-founder interactions for a large sample of fundraising startups, some of which succeed in raising capital and some of which fail. We find that, even before investors get involved, only 16% of those seeking capital are women, suggesting that non-finance factors likely play a significant role in explaining the entrepreneurship gender gap. Among those who do seek capital, we find that female founders are roughly as successful as observably similar male founders in garnering attention and funding from investors. However, when we decompose our results by investor gender, we find evidence of segmentation: female (male) founders garner less interest from male (female) investors than male (female) founders, but this is offset by the fact that they garner more interest from female (male) investors. Additional tests suggest that the gender segmentation we observe is due to homopholistic preferences rather than within-gender screening/monitoring advantages. Regardless of the mechanism, our results suggest that an increase in female investors is likely necessary to support an increase in female entrepreneurship.

Keywords: gender, entrepreneurship, angel investing, venture capital

Suggested Citation

Ewens, Michael and Townsend, Richard R., Can Access to Capital Explain the Entrepreneurship Gender Gap? (April 14, 2017). Available at SSRN: https://ssrn.com/abstract=2953011 or http://dx.doi.org/10.2139/ssrn.2953011

Michael Ewens (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Richard R. Townsend

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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