Gender Gap in Business Angel Financing

Abstract

Abstract This study explores the impact of gender on entrepreneurial finance, analyzing both the supply and demand sides of early-stage equity financing through Business Angel (BA) investments. The research investigates the probability of men and women-owned businesses securing BA investments and assesses whether the gender of BA investors influences financial transaction magnitudes, potentially disadvantaging women-owned businesses. Additionally, the study explores the intersection between the gender of BA investors and investees to test for the presence of any potential heterogenous behaviors in terms of average invested amounts by men (women) Business Angels towards women-(men-) owned target companies. Results reveal that women entrepreneurs receive less equity financing than men, with a lower probability of securing larger investments from men BAs. Notably, this bias is absent when women BAs invest in men-owned businesses. These patterns persist regardless of information availability and consideration of unobservable factors, suggesting a connection between this disadvantage and taste-based prejudice among men BAs.