Gender Diversity Effects in Investment Decisions

Abstract

This study examines the gender gap in investment decisions in a prominent setting: the American TV show Shark Tank. Our study is based on a sample of 895 pitches from 10 seasons comprising 222 episodes from 2009 to 2019. Contradicting prior research, our findings suggest that female entrepreneurs are not discriminated against in pitch success rates, independent of their respective industrial settings. We find that the valuations from the entrepreneurs themselves (males overvalued their ventures by 57.19%) and final deal valuations (male deals were overvalued by 50.50%) are significantly lower for females, hinting towards a self-imposed gender gap in entrepreneurship and angel investing. As the gender gap in entrepreneurship and angel investment seems to result from a lower rate of entrepreneurial intentions by women, we suggest fostering female entrepreneurship by raising the number of female entrepreneurs and business angels who may serve as role models among those potential female entrepreneurs and business angels at the brink of becoming actual entrepreneurs, as demonstrated in Shark Tank. Particularly, in teams, mixed founder teams consisting of males and females may support the creation of promising start-ups with viable business models.

Access to venture capital: Does gender (still) really matter?

“…This result would imply that female entrepreneurs with the same human capital and social capital level as male entrepreneurs do not face any differential treatment from venture capitalists. Venture capitalists reward their quality signals differently (Hohl et al, 2021). Indeed, these interesting findings imply that women entrepreneurs with higher social capital (Gao et al, 2021) and human capital are no longer perceived as weak compared to similar male counterparts hence no difference in the strength of signal and rewards (Huang & Kisgen, 2013).…”

“…Investors may be initially biased to invest in women entrepreneurs in general. However, when the screen on other attributes (social capital and human capital) find no observable differences from their male counterparts, in this case, they may not discriminate against female entrepreneurs (Hohl et al, 2021).…”

“…Entrepreneurship as an institution is characterized by great gender differences (Arenius & Kovalainen, 2006;Marlow & McAdam, 2012) and a very low rate of women participation (Lückerath-Rovers, 2013;Mahadeo et al, 2012). This low rate of women participation in entrepreneurship needs to be investigated whether it is solely due to lack of financing (Aernoudt & De San José, 2020) or underlying issues that result in low participation of women in entrepreneurship (Hohl et al, 2021). In this paper, we have examined whether women founders face gender bias when raising capital from venture capitalists as compared to their male counterparts using data collected from India.…”

Influential Factors of Network Changes: Dynamic Network Ties and Sustainable Startup Embeddedness

“…This is a key factor in sustainable business development [49]. Startups are often constrained by their budget, which drives many of them to look for new investments [3,50,51]. Since movelab aims to grow without external capital, they found another way to reach their goals.…”