Is the Gender Gap in Venture Funding Driven by Biased Investors?

Abstract

Gender disparity in entrepreneurship and venture capital funding has been documented in many economies across the world. This study aims to unfold whether gender disparity in venture capital funding is driven by discrimination. We conduct a randomized lab-in-the-field experiment in the UK and Europe and examine the behavior of venture capital investors towards female entrepreneurs during the screening stage of funding proposals. We find that male investors display no differential treatment or bias (taste-based discrimination and miscalibrated beliefs) against females. On the contrary, we find evidence of bias among female investors, where they positively discriminate in favor of their own gender. The study findings indicate that female entrepreneurs are not at a disadvantage when evaluated by male investors. Thus, the gender disparity in venture funding is not driven by biased male investors. The findings also suggest that increasing the number of female investors in the venture capital industry would increase females’ share of the capital invested and positively contribute to closing the gap.