The Gender of Money: How Gender Structures the Market for Entrepreneurial Capital

Abstract

The search for answers to the chronic underrepresentation of women among funded entrepreneurs has highlighted the influence of entrepreneur gender on financing outcomes. Yet it is important to also consider the demographic makeup of the investor population. Using data on 652 businesses presented to 40 investors on the televised pitch competition series Shark Tank, I examine how investor gender impacts not only who receives an offer, but on what terms, and how that may shape the structure of the market for early-stage venture financing. Exploiting unique features of my setting to overcome the empirical challenges that normally hamper the investigation of gender effects on investor behavior, I find that both male and female investors are more likely to extend offers to entrepreneurs of the same gender. I also find that female investors offer terms more favorable to entrepreneurs, in an apparent attempt to attract more desirable investment opportunities, and that female entrepreneurs appear more responsive to this strategy. These factors combine to increase the likelihood that female founders will be funded by female investors, leading to gender segregation in the market for capital. Implications of the effect of numerical representation of women among investors are discussed.