Financing the Next VC-Backed Startup: The Role of Gender

What is the role of gender in the serial founding of VC-backed startups? Despite robust evidence linking serial entrepreneurship to startup success, women comprise 13.3% of VC-backed founders but only 4% of those founding three or more startups. Using a novel design comparing men and women cofounders of the same startup, we estimate substantial gender gaps in subsequent funding outcomes on average and following failure or success of the current startup. We find these at both the extensive and intensive margins. For example, following failure, women are 22.5% less likely to found another VC-backed startup compared to their cofounders who are men. Among those who do found another VC-backed firm, women raise 53.3% less capital following failure of the current venture and 24.6% less capital following success. These gaps contribute to the well-documented gender gap in VC funding. Lower interest of women in founding new firms can only partially explain our findings. We find no evidence of gender differences in founder quality or of statistical updating by investors. Instead, consistent with unequal treatment of women, we find that women serial founders are penalized with smaller VC deals following failures of their prior startups but they are not rewarded with larger deal sizes following past successes. By contrast, men are rewarded for their prior experiences as founders, regardless of whether their startups were failures or successes. In line with theories of stereotyping and confirmation bias, we also find striking negative spillovers from unrelated women-founded failures within investors’ portfolios (and no positive spillovers from their successes).