Noni Symeonidou

Abstract

Recent studies find that female entrepreneurs attract fewer early-stage equity investments compared to their male counterparts. However, it is difficult to disentangle whether the lower amounts raised are due to lower ambition of female entrepreneurs or investors’ bias. We examine whether the perceived mismatch between the gender and the growth aspirations of the founder leads to biased investor decisions such that female entrepreneurs with high-growth aspirations are penalized relative to male entrepreneurs. We further explore whether

growth plan framing that emphasizes a venture’s strategy to achieve key milestones and minimize risk, which research has shown to improve investment outcomes, diminishes this penalty. In our first experimental study we find evidence of a mismatch penalty and show that this depends on the gender of the investor. In a second study, we investigate whether the mismatch penalty is lessened for female founders that use a growth plan framing rather than hype (promotional language). We also examine whether this effect is mediated by investors’ perception of the founder. This design allows us not only to test the existence of a mismatch penalty which could be the driving force behind women’s underrepresentation in entrepreneurial finance but also whether this penalty could be mitigated through planning.