Know Your Worth: Angel Financing of Female Entrepreneurial Ventures

Abstract

This study explores success rates in obtaining angel financing based on the gender composition of entrepreneurial teams using data from the television program Shark Tank.Consistent with prior work, we find that women-owned teams receive lower company valuations and less capital to finance their new ventures relative to their male counterparts. However, we find that the likelihood of a team receiving an offer from an angel investor is independent of the entrepreneurs' gender. We discover women-owned firms initially value their companies at significantly lower amounts than teams consisting of all males. Thus, angel investors provide lower final company valuations to women-owned firms because women, on average, ask for less.These results hold when controlling for important entrepreneur and firm characteristics that may strongly impact the angel financing outcome, such as the size of the entrepreneurial team, company age and prior success of the firm. We also find that the negative effect of a womenowned firm on the amount of financing received is highly dependent upon the industry the entrepreneurs choose to enter. JEL Classification: J15, L26, M13

Angels or Sharks? The Role of Personal Characteristics in Angel Investment Decisions

“…We also create an indicator variable that identifies instances where the 15 Variance inflation factors (unreported) confirm that multicollinearity is not a serious concern in our data. 16 In a contemporaneous working paper, Poczter and Shapsis (2016) also find evidence that female entrepreneurs request lower valuations. 17 Unreported results using the BISG race classifications are qualitatively similar.…”

“… In a contemporaneous working paper, Poczter and Shapsis () also find evidence that female entrepreneurs request lower valuations.…”