Not Negotiable? The Gender Gap in Startup Valuation and its Remedies

We explore whether the established gender gap in entrepreneurial finance also extends to startup valuations. This study uses a comprehensive sample of 966 performance observations including all pre-money valuations of 106 venture capital (VC) funded startups in the high-tech industry from European and Latin American markets. We find that startups with female CEOs receive significantly lower valuations than firms with male CEOs after controlling for a wide range of startup characteristics. We build on the role congruity theory and explore the potential moderation effects of the self-initiation and negotiation experience on gender bias in VC deals. We find that in case of female-led startups, self-initiation aggravates the gender gap in their valuations, while negotiation experience mitigates the gender gap. Further, our results show that the gender bias on the investors' side plays a stronger role in the gender gap in valuations than that on the founders' side.