Sex and Startups

Abstract

Venture Capital (VC) is widely thought to have a gender problem. Nevertheless, reliable empirical research on early-stage startups is sparse, and we still know next to nothing about whether (and how) internal governance systems within startups manifest gender effects. This paper develops and studies a first-of-its-kind data set that tracks VC-backed startup governance as reflected in corporate charters. It allows us to observe how cash flow and control rights emerge and evolve through successive rounds of startup funding, as well as the detailed structure of governance provisions that regulate internal corporate affairs. After developing this resource, we deploy it to assess whether the gender characteristics of startup founders predict differential governance terms that regulate, enable, and impede founders’ discretion in relation to their VC investors. Our ultimate findings are mixed. On the one hand, we uncover evidence that female founders face governance structurers that are distinguishable from a matched sample of male founders (as measured by the latent semantic content of charters). On the other hand, when we analyze specific, hand-coded attributes of our sample that correspond with canonical VC governance provisions, we find no strong and systematic patterns that work either to advantage or impair women founders. Our results thus pose an intriguing mystery about what is driving the gendered semantic divergence in our corpus.