Not in Style: Matching and Gender Gap in VC Investing

Abstract

This paper examines the extent to which the matching between startups and venture capitalists' investment styles accounts for financing disparities between female-and male-founded companies. Analyzing initial venture capital (VC) rounds for comparable founders and startups, the study documents that the gender financing gap can be attributed to the sorting of female-founded ventures into VCs with smaller investment cheques, as large-cheque investors are less likely to fund "typical female-founded" startups. The findings suggest that the lower predicted growth prospects of such businesses may contribute to their mismatch with large-cheque VC investors.

Keywords: Venture capital, gender gap, matching, startup performance JEL classification: G23, G24, L25, L26

JEL Classification: G23, G24, L25, L26