Entrepreneurial Fundraising Strategies and the Gender Gap: Theory and Evidence from Equity Crowdfunding

Start-ups with female founders typically raise less money than their male counterparts. Prior literature explores investor demand and finds evidence of assortative matching, where investors prefer to invest in entrepreneurs of their own gender. In the context of equity crowdfunding, we examine the supply side of the gender funding gap, asking how female and male founders anticipate different investor demand. We develop an assortative matching theory that generates four benchmark predictions, namely that female founders (i) ask for less funding, (ii) have the same campaign success probability, (iii) receive less funding if successful, and (iv) have the same overfunding ratio, defined as the ratio of funding received over funding requested. Leveraging proprietary data from a UK equity crowdfunding platform that includes both successful and unsuccessful ventures, the evidence matches the first three predictions, also finding that all-female teams have larger funding gaps than mixed-gender teams. For the overfunding ratio, we find that mixed-gender (all-female) teams have higher (lower) overfunding ratios than the all-male benchmark. We also find that female investors fund mixed-gender teams relatively more, whereas male investors give disproportionately less to all-female teams. Gender gaps increase for more capital-intensive ventures.

This paper was accepted by David Sraer, finance.

Funding: This work was supported by Said Business School, University of Oxford [John Fell Fund] and the Coller Institute of Venture at Tel Aviv University.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.06658.