Financing The Next VC-Backed Startup: The Role of Gender

Abstract

Is there a gender gap in the serial founding of VC-backed startups? Despite robust evidence linking serial entrepreneurship to startup success, women comprise 13.3% of VC-backed founders but just 4% among those who found three or more startups. We introduce a novel empirical design that exploits within-startup variation and compares future funding outcomes for men and women who co-founded the same startup. This approach helps us control for unobservable differences in startup quality. We document substantial gender gaps, both on average and following failure or success of the current startup. Following failure, women are 22.5% less likely to found another VC-backed startup compared to their cofounders who are men. Among those who do found another VC-backed firm, women raise 53.3% less capital following failure of the current venture and 24.6% less capital following success. We investigate potential demand- and supply-side drivers of these gaps. Lower interest by women in founding new firms can partially explain our findings, however the gender gap attributable to this demand channel is modest.   We find no evidence of gender differences in founder quality or to investor learning about the effectiveness of woman founders over time. Rather, we find strong evidence of unequal treatment of women by investors.  In particular, consistent with theories of stereotyping, our analysis reveals striking negative spillovers following investors' experiences with failures of other (unrelated) women-founded startups but no positive spillovers following their successes.

Keywords: Serial entrepreneurship, gender gap, venture capital-backed startups

JEL Classification: G24, J16, L26