Opposites Attract: Experimental evidence on the effects of gender in venture capitalists' investment decision-making

Abstract: Female founders are known to raise less venture funding than their male counterparts. The conventional argument is that an increase of women in investment committees would increase the capital allocated to female founders. However, the female venture capitalists' willingness to invest in female founders remain untested. We examine the effect of gender homophily on investment decision-making by conducting an experimental study sending out a pitch deck with an attached survey to 1,152 venture capitalists in Europe asking them to evaluate a business idea and allocate money from a fictional fund. All other things equal, the gender of the founders were randomly changed. Contrary to research suggesting that venture capitalists invest in founders who are similar to themselves, we find no evidence to support the theory of homophily. Our findings reveal that venture capitalists evaluate founders of the opposite gender higher and are more willing to invest in their ventures. We conclude that female venture capitalists are less likely to invest in female founders and draw upon tokenism theory to discuss the implications of our findings.