Study Finds Gender Gap in Funding of Venture Capital-Backed Startups

According to a new study from scholars at the University of Toronto, Yale University, and Columbia University, women entrepreneurs are significantly less likely than their male counterparts to secure venture capital funding for a new startup after their first startup failed.

The study found that women entrepreneurs represent 16 percent of all first-time venture capital-backed startup founders. However, they represent just 9 percent of entrepreneurs who have founded two venture capital-backed startups and only 4 percent of entrepreneurs who have started three or more venture capital-backed businesses.

Among women who do go on to start a second start-up, they are 30 percent less likely than men to secure venture capital funding if their prior business was a failure, and 18 percent were less likely to receive support when their last business was a success. Overall, women entrepreneurs acquire 14 percent less funding than their male peers. Furthermore, investors who have contributed funds to a woman-owned business that failed are significantly less likely to invest in another startup founded by a woman. Even when investors experienced successes from a woman-owned startup, they were not more likely to invest in women again.

The authors cite several earlier studies that found entrepreneurs increase their chances of future success when learning from their prior unsuccessful startups. They believe their findings suggest there is room to improve access to capital for women founders, which in turn could result in greater return on investments for financiers.