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Investors Embrace Gender Diversity, Not Female CEOs: The Role of Gender in Startup Fundraising

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  • Christopher Cassion
  • Yuhang Qian
  • Constant Bossou
  • Margareta Ackerman

Abstract

The allocation of venture capital is one of the primary factors determining who takes products to market, which startups succeed or fail, and as such who gets to participate in the shaping of our collective economy. While gender diversity contributes to startup success, most funding is allocated to male-only entrepreneurial teams. In the wake of COVID-19, 2020 is seeing a notable decline in funding to female and mixed-gender teams, giving raise to an urgent need to study and correct the longstanding gender bias in startup funding allocation. We conduct an in-depth data analysis of over 48,000 companies on Crunchbase, comparing funding allocation based on the gender composition of founding teams. Detailed findings across diverse industries and geographies are presented. Further, we construct machine learning models to predict whether startups will reach an equity round, revealing the surprising finding that the CEO's gender is the primary determining factor for attaining funding. Policy implications for this pressing issue are discussed.

Suggested Citation

  • Christopher Cassion & Yuhang Qian & Constant Bossou & Margareta Ackerman, 2021. "Investors Embrace Gender Diversity, Not Female CEOs: The Role of Gender in Startup Fundraising," Papers 2101.12008, arXiv.org.
    • Handle: RePEc:arx:papers:2101.12008
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    References listed on IDEAS

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    1. Andreas Fuster & Paul Goldsmith‐Pinkham & Tarun Ramadorai & Ansgar Walther, 2022. "Predictably Unequal? The Effects of Machine Learning on Credit Markets," Journal of Finance, American Finance Association, vol. 77(1), pages 5-47, February.
    2. Ewens, Michael & Townsend, Richard R., 2020. "Are early stage investors biased against women?," Journal of Financial Economics, Elsevier, vol. 135(3), pages 653-677.
    3. Sander Hoogendoorn & Hessel Oosterbeek & Mirjam van Praag, 2013. "The Impact of Gender Diversity on the Performance of Business Teams: Evidence from a Field Experiment," Management Science, INFORMS, vol. 59(7), pages 1514-1528, July.
    4. Patricia G. Greene & Candida G. Brush & Myra M. Hart & Patrick Saparito, 2001. "Patterns of venture capital funding: Is gender a factor?," Venture Capital, Taylor & Francis Journals, vol. 3(1), pages 63-83, January.
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    Cited by:

    1. Pavlova, Elitsa & Gvetadze, Salome, 2023. "Female access to finance: A survey of literature," EIF Working Paper Series 2022/87, European Investment Fund (EIF).

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