Do investors show team composition preferences in funding Startup teams?

In this paper, I investigate the role team gender composition plays in venture investor interests and fund realizations for early stage startups. I find that having a female-founded startup increases interests from venture organizations. However, this does not translate into higher funding for female-led startups.

Using the state-level mandated maternity benefits as an instrument for percentage of women in the startup, I show that there is a significant negative premium on being a female-led start-up. However, increasing the percentage of women entrepreneurs increases funding amount.

Further analysis show heterogeneity in funding realizations
within industries. Female-led startups are concentrated in industries like government, healthcare and utilities that tend to raise less money. Additionally, they under raise the all-male startups in these industries. On the contrary, female-founded startups tend to represent a smaller percentage of startups in industries that tend to raise higher mean amounts. Furthermore, the female-led startups tend to perform as well as the all-male startups and in some cases outperform the all-male startups in these sectors.


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