Venture Capital and the Gender Financing Gap: The Role of Accelerators RESEARCH SNAPSHOT | FEBRUARY 2020 IN PARTNERSHIP WITH © International Finance Corporation 2020. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. International Finance Corporation (IFC) is a sister organization of the World Bank and a member of the World Bank Group. It is the largest global development institution focused on the private sector in emerging markets. IFC works with more than 2,000 businesses worldwide, using its capital, expertise, and influence to create markets and opportunities Research Partners where they are needed most. In fiscal year 2019 it delivered more than $19 billion in long-term financing for developing World Bank Africa Gender countries, leveraging the power of the private sector to end Innovation Lab (GIL) extreme poverty and boost shared prosperity. For more conducts impact evaluations, which information, visit www.ifc.org. assess the outcome of development interventions in sub-Saharan Africa to generate evidence on how to close the Women Entrepreneurs Finance Initiative (We-Fi) is the first gender gap in earnings, productivity, assets, and agency. With the results multilateral fund specifically designed to unleash the potential of impact evaluations, GIL supports of women entrepreneurs in emerging economies. We-Fi the design of innovative, scalable funds projects that work across the entire entrepreneurial interventions to address gender ecosystem, including blended finance investments, capacity inequality across Africa. The goal is to building for institutions and women entrepreneurs, and policy enable project teams and policymakers reforms to increase women’s access to finance, markets and to advocate for better gender integration networks. We-Fi is a collaborative partnership among 14 using evidence. contributing governments and six multilateral development The Global Accelerator banks that serve as implementing partners. It engages with Learning Initiative (GALI) a broad range of external partners, including private sector is a collaboration between the Aspen clients, non-governmental organisations, and government Network of Development Entrepreneurs and international entities. For more information, visit www. (ANDE) and Social Enterprise @ Goizueta we-fi.org. (SE@G) at Emory University. GALI is designed to explore and answer key questions about enterprise acceleration, Village Capital is a global venture capital firm that helps such as: Do acceleration programs entrepreneurs bring big ideas from vision to scale. Since 2009, contribute to revenue growth? Do we have supported more than 1,100 early-stage entrepreneurs they help early-stage ventures attract through our investment-readiness programs. Over the last investment? Do they work differently 10 years, Village Capital has developed and tested a unique for different types of entrepreneurs? GALI builds on the Entrepreneurship investment methodology called peer selection, which is Database Program at Emory University, focused on addressing existing gender, racial, and regional which works with accelerator programs bias in the investment process. Our affiliated fund, VilCap around the world to collect data Investments, has provided seed funding to more than 100 describing the entrepreneurs that they program graduates. attract and support. 3 Contents 5 | Abbreviations and Acronyms 5 | Figures and Tables 6 | Acknowledgements 7 | Executive Summary 9 | Introduction 11 | Research Methodology 15 | Key Insights 15 Key Insight 1: Acceleration exacerbates the gender financing gap in equity financing. 19 Key Insight 2: Acceleration removes the financing disadvantage female-led startups face when raising debt. 22 Key Insight 3: The persistent gender financing gap cannot be easily attributed to differences in the quality of the startups, suggesting that investor bias and risk perception may play a role. 29 Key Insight 4: There are no clear accelerator program design elements that overcome the gender financing gap. 32 | Recommendations 34 | Bibliography 36 | Endnotes Abbreviations and Acronyms ANDE Aspen Network of Development Entrepreneurs CY Calendar Year GALI Global Accelerator Learning Initiative GIL Gender Innovation Lab IFC International Finance Corporation OLS Ordinary Least Squares We-Fi Women Entrepreneurs Finance Initiative Figures Figure 1: Startups in the Dataset by Sector 13 Figure 2: Average Equity Raised 17 (A) Startups That Participated in an Accelerator (B) Startups That Did Not Participate in an Accelerator Figure 3: Difference in Equity Raised for Female-Led Startups Compared to Male-Led Counterparts 17 Figure 4: Gender Financing Gap Pre-Acceleration: All Applicants 20 Figure 5: Difference in Capital Raised for Female-Led Startups Compared to Male-Led Counterparts by Equity and Debt 20 Figure 6: Increase in Debt Raised CY Post-Application 21 Figure 7: Average Debt Raised 21 (A) Startups That Participated an an Accelerator (B) Startups That Did Not Participate in an Accelerator Figure 8: Founder Characteristics 23 (A) Prior Founder Experience (B) Higher Education (C) Average Founder Age Figure 9: Startup Characteristics 23 (A) Target Margins (B) Percentage Of Companies with Intellectual Property (C) Commercial Objectives Figure 10: Breakdown: Startups in Sector 24 (A) By Gender (B) Percentage of Companies in Sector Figure 11: Breakdown: Startups in Region 25 (A) By Gender (B) Percentage of Companies in Region Figure 12: Percentage of Companies with Women on Founding Team 30 Tables Table 1: Program Design Variables’ Correlation to Gender Gap 30 Acknowledgements The research in this report was made possible by funding from the Women Entrepreneurs Finance Initiative (We-Fi), and the leadership of International Finance Corporation (IFC) and Village Capital. IFC is committed to identifying key constraints affecting women’s economic empowerment and reducing gender inequalities through business environment reforms, strengthening women-owned enterprises, and creating better employment opportunities for women. This publication was developed under the overall guidance of William Sonneborn, Senior Director, Disruptive Technologies and Funds, IFC, and Allie Burns, CEO, Village Capital. The core working group of the initiative — jointly led by Shruti Chandrasekhar, Head, SME Ventures & Startup Catalyst, IFC, and Heather Matranga, Senior Director, Strategic Innovations, Village Capital — comprises Stephanie Bamfo and Erinda Semanjaku, from IFC; and Alana Davicino, Apoorv Karmakar, Ben Wrobel, and Peixian Liu, from Village Capital. Research support and data analysis was provided by Aaron Mitchell from Maderas Partners. The core working group was advised by Markus Goldberg, Joao Montalvao, and Salman Alibhai from the World Bank Gender Innovation Lab (GIL); Saurabh Lall, PhD, University of Oregon; Amisha Miller, PhD candidate, Boston University; and Abigayle Davidson, Research Manager, Aspen Network of Development Entrepreneurs (ANDE). The research was guided by conversations with multiple industry experts whose contributions were essential to the report. The team is grateful to Amit Alex, Suzanne Biegel, Peris Bosire, Odunayo Eweniyi, Robert Haynie, Heather Mae Kipnis, Henriette Kolb, Ramona Liberoff, Claudia Makadristo, Monica Mehta, Andreata Muforo, Simunza Muyangana, Hanh Nam Nguyen, Pavee Ramanisankar, Simmi Sareen, Davide Strusani, Wendy Teleki, Katleho Tsoku, Ankita Vashishtha, Priyanka Verma, and Bharath Visweswariah, for their comments, suggestions and input. 6 Executive Summary In the past decade, entrepreneurship has emerged Yet the reasons for this gender financing gap in as a powerful tool to address the formidable emerging markets are not well understood, nor challenges that limit emerging market are the means by which it can potentially be economies’ ability to grow in a sustainable resolved. and inclusive fashion. Entrepreneurs and their startups are able to launch transformative To address this, the International Finance innovations that address development gaps — Corporation (IFC), in collaboration with in areas ranging from food security to extreme Women Entrepreneurs Finance Initiative (We- poverty — using solutions that are localized, Fi), Village Capital and the World Bank Gender context-appropriate, and scalable. Innovation Lab (GIL), set out to evaluate the role that accelerators — organizations that provide For entrepreneurs to scale these solutions, capacity-building support to early-stage startups they need outside resources. Research shows to help them scale their companies and attract that financial capital is one of the most critical investment — can play in addressing the gender resources for a growing company: young financing gap. To determine this, we turned our companies that access outside financing are able attention to two primary questions, with a specific to grow up to 30% faster than those that do focus on startups in emerging markets: not.1 However, it is difficult for entrepreneurs in emerging markets to access that critical capital • What is the gender financing gap pre- and post- — in part because of the stark inequality in how acceleration? What factors explain the gap? investment capital is allocated to founders. • What strategies could accelerators employ to address the gender financing gap? The gender financing gap is a particularly clear example. Female-led startups, or those This snapshot provides an overview of our key with at least one female founder, receive a insights from the initial research, which has disproportionately small percentage of the flow focused primarily on answering the first question, of global venture capital. Only 11% of seed namely understanding the gender gap and the funding capital in emerging markets goes to reasons behind it. The findings from this initial companies with a woman on their founding research, which we have highlighted below, have team, and the figures are even lower for later- led us to develop a series of hypotheses that we will stage funding,2 despite the overwhelming test through experimental accelerator programs evidence that investing in gender-diverse over the next year to answer the second question teams leads to stronger business outcomes.3 around strategies for accelerators to address the This ultimately limits the ability of innovative gender gap. developmental solutions to grow. 7 The research informing those hypotheses is based upon a quantitative analysis of a global dataset of more than 2,000 companies collected over a five-year period, supported by the Global Accelerator Learning Initiative (GALI). Using this dataset, we evaluated the commercial performance of male-led startups, or those with all-male founding teams, and female-led startups, or those with at least one female on the founding team, pre-acceleration and post-acceleration. FOUR KEY INSIGHTS EMERGED Acceleration exacerbates the gender financing gap in equity financing. A key 1 focus of this study was to understand how accelerators are currently impacting the gender financing gap. We found that acceleration widens the gap for equity. We see that male-led startups, on average, increase the amount of equity they raise post-acceleration by 2.6 times as much as female-led startups. This is due to the fact that male-led startups see a significant increase in the amount of equity if they participated in a program, while female-led startups see a similar increase whether they were accelerated or not. These findings suggest that acceleration has little to no effect on the ability of female-led startups to raise equity. Acceleration removes the financing disadvantage female-led startups face 2 when raising debt. We found that while acceleration seems to exacerbate the equity financing gap, it actually helps to reduce the disadvantage female-led startups face in raising debt. When comparing startups that participated in an accelerator with those that did not, we see that male- led startups increase the amount of debt they raised post-acceleration or in the calendar year post- application at a similar rate, regardless of whether they participated in a program, while female- led startups that participated in a program increase the amount of debt they raise by nearly 2.5 times as much as female-led startups that did not participate in a program. The persistent gender financing gap cannot be easily attributed to 3 differences in the quality of the startups, suggesting that investor bias and risk perception may play a role. It is clear that there is a gender financing gap pre-acceleration, and that acceleration is more effective at addressing the gap for debt than for equity. Statistical analysis shows us that the gap cannot be easily explained by any quantifiable aspect of either startup or founder differences, including founder characteristics, such as education level or experience, and startup characteristics, such as intellectual property, sector of operation, geography, or revenue generated. Building on a growing body of research, this analysis suggests that the gender makeup of the founding team is strongly influencing the disparity in capital raised, suggesting a potential bias in investor decision making or a higher perceived risk for female-led startups. 8 There are no clear accelerator program design elements that overcome the 4 gender financing gap. Through this research, we were interested in identifying specific accelerator traits that are more effective in reducing the gender financing gap. While the most likely traits that might correspond with a smaller gender financing gap — such as having a higher-than-average number of women on a selection committee — are important for gender parity in acceleration, they have little effect on the overall gap. We hypothesize that effective interventions will need to be more holistic, reaching beyond addressing startup behaviors and focusing on influencing the behavior of investors, and that to more effectively address the gender gap, accelerators have a role to play in helping mitigate investors’ bias and risk perception. Through this research, we were able to establish explore throughout accelerator programs over how accelerators are currently impacting the the next year, and encourage other interested gender financing gap. We see that acceleration accelerators and investors to do the same. seems to have an outsized impact on the ability Once we have implemented the experimental of male-led startups to raise equity, thereby programs and completed an analysis of the increasing the equity gap, and an outsized results, we will release a toolkit for accelerators impact on the ability of female-led startups to and investors outlining concrete actions they raise debt, thereby reducing the disadvantage can take to close the gender financing gap. female-led startups face when raising debt. Addressing the gender financing gap will There is a clear need for new strategies to address require going beyond the status quo: we need to the gender financing gap. As a next step, we innovate in our approach to make real progress have developed a series of hypotheses to test and toward gender parity in entrepreneurship. Acceleration seems to have an outsized impact on the ability of male-led startups to raise equity, and the ability of female-led startups to raise debt. 9 Introduction One of the bright spots in the push to achieve the capital, funded companies achieved 30% more United Nations’ Sustainable Development Goals growth in revenue and 50% more growth in has been the emergent role of entrepreneurs employment than companies that did not raise using technology to launch transformative funding — an unsurprising statistic given the innovations that address development gaps and boost that capital can give startups to increase development goals, in areas ranging from food their revenues, create new jobs, and scale their security to poverty alleviation. Advances in businesses.7 The presence of capital providers communications technology, expanding mobile can also play a broader ecosystem-level role that phone ownership and other trends have helped supports entrepreneurship, including signaling small companies scale at unprecedented rates. effects and role model effects in the community.8 Startups can offer solutions that are localized, Given the urgency of the challenges facing contextualized, and scalable. In Nigeria, for emerging markets, the scale and speed of effective example, female-founded personal savings and solutions is crucial, making the need for early- investment platform PiggyVest, launched in stage capital all the more acute for founders in 2016, now has more than 350,000 users saving those markets with great ideas. over $2.7 million in total across the country every month.4 Similarly, Loans4SME, an Indian- In 2018, startups in emerging based female-led platform for small businesses markets with a woman on their to raise debt capital, has contributed a total of founding team received $35 million of working capital to more than 70 businesses since its founding in 2016.5 ONLY Growing and sustaining these innovative solutions requires outside resources, of 11% OF SEED which early-stage venture capital is one of FINANCING the most important as a risk-tolerant source of funding. Companies that access external funding — whether from family and friends, AND angel investors, venture funds, private equity funds, philanthropic foundations, corporate 5% OF LATER-STAGE actors, or government agencies — are able to VENTURE CAPITAL grow up to one third faster than those that do not.6 A study of young firms participating in accelerators found that two years after raising 10 Yet the way that critical capital is deployed is Why and how can we make more notable remarkably unequal. progress toward addressing it? There is a clear and noticeable distortion in how To help answer these questions, we can turn venture capital is distributed among both places to accelerators — organizations that support and people. Startups in emerging markets raise entrepreneurs and connect them with the social, only a fraction of the capital raised by those in financial, and human capital they need to scale.14 developed markets — in 2018, emerging-market In the past decade, hundreds of accelerators, economies accounted for just 18% of equity incubators and other “entrepreneur support and venture capital raised.9 More remarkably, organizations” have been launched around startups with a woman on their founding or the world, many with an explicit focus on leadership team received only 11% of seed inclusive entrepreneurship or social impact.15 financing and only 5% of later-stage venture Although there have been studies evaluating capital in emerging markets.10 This is despite the effectiveness of acceleration in general, less the fact that several recent studies have shown is known about the role of acceleration in the a strong business case for investing in startups fundraising process for female-led startups.16 with diverse leadership teams — in the form of stronger performance and better returns on IFC, in collaboration with We-Fi, Village Capital equity.11 12 13 and the World Bank GIL, set out to learn what the gender financing gap looks like for startups In 2018, emerging-market pre- and post-acceleration and what factors economies accounted for just may cause that gap, and to identify strategies that accelerators can employ to address it. 18% The following snapshot provides an overview of the key findings from our initial research, of equity and venture capital raised conducted from May to December 2019, which focused on qualitative and quantitative analysis of business performance data from more than This gender financing gap for early-stage, high- 2,000 startups that applied to accelerators. growth startups — which are the focus of this report — is a persistent and well-documented We will incorporate insights from the research global problem. However, the causes of that in experimental accelerator programs to test gap are still poorly understood, and while there strategies that accelerators can employ to more has been a proliferation of new interventions effectively reduce the gap, and synthesize these over the past decade aimed at addressing the findings in an action-oriented, publicly available gap, progress towards a more equitable gender toolkit for accelerators, investors, and other balance in venture funding has been limited. intermediaries. 11 Research Methodology What follows in the next section are some of the key insights we gleaned from a review of more than 2,000 startups over five years, supported by data collected by GALI, a partnership between ANDE and Emory University designed to study the effectiveness of accelerators on entrepreneurship. GALI DATA OVERVIEW Since 2013, GALI has partnered with impact- “post-acceleration”). We evaluated a sample of oriented accelerators and other entrepreneur 2,157 startups,18 which included both startups support programs to collect detailed data that participated in an accelerator program from more than 19,000 applicants and 3,100 (“participants”) and those that, for various participants to 280 accelerator programs. reasons, applied to a program but did not GALI surveys startups when they first apply participate in one (“non-participants”).19 We to participate in an accelerator program, and limited the sample to those startups that completed then each calendar year following the program, the post-acceleration survey,20 identified as for- regardless of whether or not they participated in profit companies, and provided gender data for the accelerator, to evaluate the performance of their founding teams. This sample allowed us to the startups over time. GALI provides a publicly compare, by gender composition of the founding available version of the anonymized dataset.17 team, companies’ performance at the time they applied to an accelerator to their performance post-acceleration (for participants) and in CY post-application (for non-participants). RESEARCH DATASET To understand the gender financing gap, we Startup Data: The data in this research divided the data into two categories of startups: snapshot represents a subset of data collected by GALI from startups that applied to 1. Startups with no female founders, accelerator programs between 2013 and 2018, referred to in this research snapshot as and includes both application data (if did not “male-led startups.” participate, “application;” if participated,“pre- 2. Startups with at least one female acceleration”) and data collected in the next founder of a maximum of three co- calendar year (if did not participate, “Calendar founders, referred to as “female-led Year [CY] post-application;” if participated, startups.”21 12 The startups in the dataset represent a wide yet raised any formal financing at the time they geographic range, with 34% hailing from sub- applied to an accelerator program. Saharan Africa, 29% from Latin America and the Caribbean, 23% from North America, 8% Accelerator Program Data: In addition to from South Asia, and the remaining 6% from evaluating the data at the startup level, we also across Europe, the Middle East and North Africa, evaluated specific characteristics of the accelerator other regions of Asia, and the Pacific. The most programs to determine which factors, if any, frequently reported sectors included agriculture were correlated with a reduced gender financing (18%), education (12%), health (12%), gap. This analysis was at the program level financial services (10.5%), and information and and comprised a sample size of 83 accelerator communication technologies (7.8%). programs, which could include multiple programs for one accelerator organization. We limited Further, the startups in the dataset are early the dataset to those programs that provided stage, generally at either the pre-seed or seed programmatic data, had at least two female-led stage. Roughly 46% of the startups in the and two male-led startups in the cohort, and dataset were pre-revenue and 77% had not supported for-profit startups. FIGURE 1: Startups in the Dataset by Sector Water - 2.0% Supply Chain Services - 2.1% Agriculture - 18.3% Artisanal - 2.5% Tourism - 2.6% Environment - 5.1% Other - 12.8% Information and Communication Technologies - 7.8% Energy - 8.3% Health - 12.1% Financial Services - 10.6% Education - 12.0% Housing Development, Culture, Infrastructure, and Technical Assistance all represent 1% or less. VARIABLES Startup Data: We primarily focused on commercial post-application and post-acceleration, calculated performance indicators when evaluating the gender by subtracting the amount of each at application or financing gap, which included: equity financing pre-acceleration from the amount of each at CY post- and debt capital raised,22 including a combined application and post-acceleration. We also evaluated variable for both equity and debt; philanthropic startup characteristics, such as sector, geography, capital raised; revenue generated; and growth in and intellectual property, among others, and founder equity financing, debt capital, and revenue at CY characteristics, such as education and experience. 13 Accelerator Program Data: We evaluated and geography, and commercial performance program characteristics that we thought would variables pre-acceleration, evaluating statistical be most closely correlated with the gender significance for each. The primary dependent financing gap, such as whether the program variables we analyzed were revenue, equity, has a stated preference for supporting female- debt, and philanthropic capital post-acceleration led startups, the gender makeup of the selection and at CY post-application, considering the committee, the overall length of the program, independent variables of gender, participation in and programmatic structure. an accelerator, sector, geography, and revenue, equity, debt, and philanthropic capital pre- ANALYSIS acceleration. Startup Data: In evaluating the startup data, We primarily evaluated statistical significance we first truncated each of the commercial up to the 90th percentile. However, due to the performance variables (capital raised and revenue sample size, we included significance up to the generated) down to the 99th percentile of the 80th percentile in a few cases, and have noted entire sample dataset to ensure outliers were not which ones in the key insights that follow. skewing the findings. This ensured that we did not eliminate outliers since success in venture Accelerator Program Data: For the program- capital is often captured by the outliers, but we level data, we first identified program-level dropped the value of the outliers to the 99th variables that could logically correspond with percentile value to keep the high performance in how female-led startups fare in a program, the dataset while building a dataset that could including representation of women on selection be analyzed. committees and in mentor pools, as well as The analysis relied on a series of t-tests program design choices such as duration and linear ordinary least squares (OLS) and whether the program had a structured regressions. The t-tests primarily focused on curriculum. We then calculated, within each the relationship between gender and specific cohort, the gender gap (average equity and debt commercial performance variables and startup growth experienced by male-led startups minus characteristics, evaluating the statistical that experienced by female-led startups), and ran significance in any notable differences between t-tests to determine whether these program-level male-led and female-led startups. The linear variables corresponded with consistently larger regressions similarly focused on the relationship or smaller gender gaps (at the cohort level), between gender and specific commercial noting those that were significant at at least the performance variables, while controlling for 90th percentile. various startup characteristics, such as sector 14 Key Insight 1: Acceleration exacerbates the gender financing gap in equity financing. A key component of this study was to understand how accelerators are currently impacting the gender financing gap, where we see that female-led startups in emerging markets receive only 11% of seed funding.23 To answer this central question, we compared the gender financing gap for equity at application and pre-acceleration to the gap post-acceleration and at CY post-application. We found that acceleration widens the gender financing gap for equity. When comparing this to the group of startups that did not participate in an accelerator, we see that the increase in the gap is less extreme. This is due to the fact that male- led startups see a significant increase in the amount of equity if they participated in a program, while female-led startups see a similar increase whether they were accelerated or not, suggesting that acceleration has little to no effect on the ability of female-led startups to raise equity. We explore some of the potential underlying reasons for the gap and corresponding increase in Insight 3. To understand the impact of acceleration on the gender financing gap, we first evaluated the gap pre-acceleration and at application and then compared that to the gap post-acceleration and at CY post-application. We initially compared the differences in the average commercial performance of female-led and male-led startups that completed an accelerator and those that did not through a series of t-tests. We then conducted a series of linear regressions comparing the same factors, controlling for variables that may influence differences in commercial performance, such as sector, geography, and commercial performance pre-acceleration. THE GENDER FINANCING GAP PRE-ACCELERATION We found that the gap is readily apparent the time they apply to an accelerator (17% and when startups apply to an accelerator: male- 20%, respectively), indicating that when female- led startups already have nearly twice as much led startups raise equity, they do so in smaller equity at application compared to female-led amounts. Despite these differences at the time startups. This is true despite the fact that the startups apply to accelerators, male-led and female- percentage of female-led startups that have led startups are selected to participate in accelerators raised equity was only slightly lower than at similar rates. that of male-led startups with equity raised at THE GENDER FINANCING GAP IN THE CY POST-APPLICATION We also found that the impact of raising less significant disadvantage by having a woman on equity capital initially may compound over their founding team: female-led startups raise, time: the amount of equity raised at application on average, $15,000 less equity than male-led is highly correlated with the amount of equity startups in the CY post-application, even when raised in the CY post-application. For every controlling for sector, geography, and commercial dollar of equity raised at application, startups performance at application.25 raise an additional 77¢ in equity the next calendar year post-application on average.24 We further broke this down to understand the differences in the gap for those that participated Further, see that the gap increases even when in an accelerator and those that did not. We taking the compounding impact of having expected to see that acceleration would narrow less capital initially into consideration. In the gap, even if only slightly. However, we found other words, regardless of how much equity the opposite: the gap seems to widen even further they had initially, female-led startups are at a for participants. 16 Accelerator Participants: Pre- and FIGURE 2: Average Equity Raised Post-Acceleration Performance (A) Startups that participated in an accelerator Male-led startups that participated in an $125k accelerator see, on average, an increase of $58,000 $104,322 $100k in equity financing raised, while their female- ,676 $58 GAP: $75k led counterparts experience an increase of only $45,646 2.6X $50k $22,388 $22,000. Put another way, acceleration increases $25k $47,754 the amount of equity male-led startups raise 2.6 $25,366 $0 times more than female-led startups. Pre-Acceleration* Post-Acceleration* Male-led (N=360) Female-led (N=319) Accelerator Non-Participants: Performance at Application and CY Post-Application (B) Startups that did not participate in an accelerator $125k We compared this to the group of startups that $100k applied to but ultimately did not participate in $75k an accelerator. For these startups, the increase in $63,705 GAP: $50k 2 2.2X the amount of equity financing male-led teams $37,74 $25k $25,963 received compared to female-led startups over the $16,997 $0 same period was roughly 2.2 times higher: male- $10,980 $27,977 led teams still raise more equity, but the difference Application* CY Post-Application* is less extreme. This indicates that the gender Male-led (N=781) Female-led (N=679) financing gap is wider for participants than for non-participants. *p<0.01 FIGURE 3: Difference in Equity Raised for Female-Led Startups Compared to This holds true even when we controlled Male-Led Counterparts for sector, geography, and commercial performance pre-acceleration through a Completed -$22,447 Accelerator linear regression. Female-led startups that (N=674)* participated in an accelerator fare much Did not complete worse, raising, on average, $22,000 less -$12,566 Accelerator (N=1448)** equity than their male-led counterparts, compared to $12,500 less for female- -$25k -$20k -$15k -$10k -$5k $0 led startups that did not participate in an *p<0.01 **p<0.1 accelerator — nearly a 2x difference. 17 It is important to note that this does not necessarily mean that female-led participants raise less equity than female-led non-participants post-acceleration. Rather, the increase in the gap is because male-led startups saw a greater increase if they participated in an accelerator. Male-led participants saw about a 1.5x increase in equity if they participated in an accelerator, whereas female-led startups saw a similar increase regardless of participation. These findings illustrate that not only is there a gender financing gap in equity pre-acceleration, but that the gap increased for those that participated in an accelerator. The findings further suggest that acceleration has a greater impact on the ability of male-led startups to raise equity and little-to-no impact on female- led startups. We explore some of the potential underlying reasons for the gap and corresponding increase in Insight 3. Not only is there a gender financing gap in equity pre-acceleration, but that gap increased for those that participated in an accelerator. 18 Key Insight 2: Acceleration removes the financing disadvantage female-led startups face when raising debt. To understand the impact of acceleration on the gender financing gap, we further evaluated the disadvantage that female-led startups face in raising debt compared to male-led startups pre- and post-acceleration, and compared that to the gap we saw in equity financing. We found that while acceleration seems to exacerbate the equity financing gap, it actually helps remove the disadvantage that female-led startups face when raising debt. Female-led startups raised significantly more debt if they participated in a program, while male-led startups raised about the same amount whether they were accelerated or not. The effect is that while acceleration does not decrease the gender financing gap for debt, unlike with equity, it generally prevents the gap from increasing. We explore why this may be in Insight 3. Similar to our analysis of the equity financing gap, to understand the debt financing gap, we compared the debt gap pre- and post-acceleration. Using similar statistical techniques, we first compared the average debt performance of female-led and male-led startups that completed an accelerator with that of those that did not, through a series of t-tests. We then conducted a series of linear regressions comparing those same factors, controlling for variables that may influence differences in commercial performance, such as sector, geography, and commercial performance pre-acceleration. THE GENDER FINANCING GAP FOR DEBT FIGURE 4: Gender Financing Gap PRE-ACCELERATION Pre-Acceleration - All Applicants $40k We found that the debt gap between male-led GAP: 1.5X $32,014 GAP: 2.1X and female-led startups is actually narrower $30k than the equity financing gap before startups $17,903 $20k even participate in an accelerator. When startups $15,395 $11,695 apply to an accelerator program, male-led $10k startups have, on average, $17,000 in debt $0k financing, while female-led startups have, on Debt* Equity** average, around $11,000, making the gap about Male-led (N=1147) Female-led (N=1010) 1.5x for debt compared to 2.1x for equity. *p<0.05 **p<0.1 THE GENDER FINANCING GAP FOR DEBT FIGURE 5: Difference in Capital Raised for POST-ACCELERATION Female-Led Startups Compared to Male- Led Counterparts by Equity and Debt Notably, when controlling for sector, geography, and commercial performance differentials pre- Equity CY acceleration, we see that female-led startups face -$14,981 Post-Application* less of a disadvantage when raising debt post- acceleration than when raising equity, regardless Debt CY -$7,008 of their participation in an accelerator. Female- Post-Application** led startups, on average, raise only $7,000 less debt — compared to $15,000 less equity — than -$15k -$10k -$5k $0 their male-led counterparts. (N=2122) *p<0.05 **p>0.15 20 Comparing Startups that Participated in FIGURE 6: Increase in Debt Raised an Accelerator to Startups that did not CY Post-Application Acceleration also seems to have a positive impact on GAP: GAP: the ability of female-led startups to raise debt capital, 2.9X 1.2X whereas it has little-to-no impact on male-led startups’ $30k $24,960 $26,562 ability to raise debt. Female-led startups see a significant $20k $21,546 increase in the amount of debt if they participated in a $8,700 program, 2.5 times as much as female-led startups that $10k did not, while male-led startups see a similar increase $0k whether they participated or not. Did Not Participate * Participated While acceleration does not narrow the gender Male-led (N=1141) Female-led (N=998)* financing gap for debt, unlike with equity, it generally *p<0.01 prevents the gap from increasing. Conversely, we see a significant increase in the debt gap for non-participants: the gap increases roughly 4.8x for startups that did not FIGURE 7: Average Debt Raised participate versus a slight increase of 1.5x for those that participated. (A) Startups that participated in an accelerator This is even more notable considering the amount of $60k $55,044 debt raised pre-acceleration is highly correlated with the amount of debt raised post-acceleration: for every $1 of $40k $28,482 debt raised pre-acceleration, startups raise an additional $39,788 $20k 68¢ of debt post-acceleration, on average.26 The finding $18,242 indicates that acceleration limits the compounding $0 disadvantage that female-led startups face when having Pre-Acceleration Post-Acceleration less capital initially. Male-led (N=360) Female-led (N=319) This effect holds even when we control for sector, geography, and commercial performance pre- acceleration through a linear regression. We see that (B) Startups that did not participate in an accelerator female-led startups that did not participate in an accelerator raise, on average, $11,000 less in debt than $60k $38,066 male-led startups, but female-led participants do not see $40k a disadvantage in raising debt compared to their male- $13,106 led counterparts.27 $20k These findings demonstrate that acceleration has an $17,526 $0 $8,826 outsized impact on the ability of female-led startups Application CY Post-Application* to raise debt, and in doing so, helps remove the Male-led (N=781) Female-led (N=679) disadvantage they face for having a female founder. We *p<0.01 explore why this may be in Insight 3. 21 Key Insight 3: The persistent gender financing gap cannot be easily attributed to differences in the quality of the startups, suggesting that investor bias and risk perception may play a role. To determine what might explain the gender financing gap, and the differential impact of acceleration on the gap for debt and equity financing, we evaluated several factors that may contribute to the gap. We found that the gender financing gap cannot be easily explained by any quantifiable aspect of either startup or founder differences, such as education level or experience of the founder, or intellectual property, sector, or geography of the startup. Building on a growing body of evidence, this analysis suggests that gender plays a role in this capital disparity, including the potential for bias in investor decision making or higher perceived risk for female-led startups. The analysis further suggests that there may be a positive correlation between risk and the disadvantage female-led startups face: as risk is reduced, so is the opportunity for investor bias. The extent to which investor bias and higher perceptions of risk play a role warrant further exploration. To better understand what might explain the gender financing gap, we evaluated several variables that might account for — or at least contribute to — the gap. If we found any differences between female- led and male-led startups, we then tested whether those differences correlated to the gap, using both t-tests and linear regressions, as discussed below. STARTUP AND FOUNDER CHARACTERISTICS We identified startup and founder characteristics that might reasonably explain the financing disparity, and evaluated whether there were any key differences in these characteristics, including: • Founder Characteristics: Education, previous founding experience, and age; • Startup Characteristics: Intellectual property, target margins, commercial objectives, fundraising targets for next 12 months, sector of operation, and geography.28 FIGURE 8: Founder Characteristics (A) Prior Founder Experience (B) Higher Education (C) Average Founder Age 78% 74% 63% 34.7 39% 39% 35.2 57% University Degree Graduate Degree Across most of the factors we evaluated we did not find any notable differences that could explain the difference or warrant further analysis through more sophisticated statistical techniques.29 FIGURE 9: Startup Characteristics (A) Target Margins (B) Companies with (C) Commercial Objectives Intelllectual Property 40% 90% 83% 30% 54% 20% 10% 16% 50% 9% 0% 0 - 5% 6 - 10% 11 - 15% 16 - 20% >20% Earn Profits Cover Costs Male-led (N=1147) Female-led (N=1010) 23 There are a few notable exceptions: fundraising fundraising targets do not necessarily indicate the targets, sector, and geography. amount startups are seeking when meeting with prospective investors, this analysis indicates that Fundraising Targets fundraising targets have little, if any, impact on the When evaluating the one-year fundraising targets overall gender financing gap. that male-led and female-led startups reported when they applied to accelerator programs, we Sector and Geography see that male-led startups, on average, target to We also saw variability in the percentage of female- raise 63% more equity than female-led startups led versus male-led startups within sectors and and 50% more debt. However, on average, both geographies. male-led and female-led startups raise only a small fraction of their overall targets, around 0.5% and There is a higher percentage of female-led startups 8%, respectively, indicating that the correlation than of their male-led counterparts within may not be very strong. Further, linear regressions traditionally less capital-intensive sectors, like illustrate that the fundraising targets have a very artisanal and culture. Similarly, there is a higher limited effect on the actual amount raised post- percentage of male-led startups than of their acceleration, indicating that the targets are likely female-led counterparts within traditionally high- inconsequential. Although it is plausible that growth tech sectors, like financial services and ICT. FIGURE 10: Sector Breakdown by (A) Gender and (B) Percent of Companies in Each Sector Agriculture Other Health Education Financial Services Energy ICT Environment Tourism Artisanal Supply chain Services Water Housing Development Culture Infrastructure Technical Assistance Male-led Female-led 0% 5% 10% 15% 20% 24 With regard to geography, there are a higher percentage of male-led startups than of their female-led counterparts in regions that tend to receive higher rates of investment capital, such North America and Europe. FIGURE 11: Region Breakdown by (A) Gender and (B) Percent of Companies in Each Region Africa LatAm / Caribbean North America South Asia Europe Southeast Asia MENA Pacific Western/ Central Asia East Asia Male-led Female-led 0% 10% 20% 30% 40% Due to these differences, we controlled both applied to an accelerator program through sector and geography through linear regressions linear regressions. We also accounted for gender to better account for the influence of these financing disparity at time of application in differences on the gender financing gap. The t-tests, by evaluating how much additional results of the regression indicated that even capital startups raised pre- and post-acceleration when taking these differences into account, we (the “increase” in capital raised). In both cases, still found a significant gender financing gap as we still saw a significant gender financing gap described in the previous two insights. post-acceleration, as described in the previous two insights. Commercial Performance Pre-Acceleration Another factor that could potentially Revenue Performance Effect of Investment contribute to the post-acceleration gender gap We also wanted to explore whether there were is the commercial performance differences any notable differences in the overall effect of between female-led and male-led startups pre- an investment on subsequent performance of accelerator, including differences in the amount a startup — in other words, what impact does of equity, debt, and philanthropic capital raised, the investment have on business growth or and revenue generated. To account for these sustainability in a male-led startup versus in a differences, we controlled for the impact of female-led startup? commercial performance at the time startups 25 Through linear regressions, we evaluated the Rather than explaining the disparity, the increased correlation between the amount of investment revenue performance of female-led startups versus startups raise pre-acceleration and the revenue male-led startups leads to more questions around generated post-acceleration, controlling for how gender plays a role in the investor decision sector, geography, and other commercial making process, discussed in the next section. performance variables. for every $1 of pre-acceleration We found that for every dollar of equity equity investment, females saw $.40 investment female-led companies had pre- of revenue post-acceleration, with acceleration, they saw about 40¢ of revenue no correlation among males. generated post-acceleration.30 Notably, we did not find any correlation among these variables $ for male-led startups. Further, we saw that female-led startups generate $ twice as much revenue per dollar of debt investments than their male-led counterparts. for every dollar of debt raised For every dollar of debt raised pre-acceleration, female-led startups raised $1.12 female-led startups raise $1.12 of revenue post- of revenue post-acceleration, while acceleration,31 compared to 54¢ for male-led male-led startups raised $.54 startups.32 THE ROLE OF INVESTOR BIAS IN THE GENDER FINANCING GAP If the gender financing gap cannot be that female-led startups face in raising debt clearly attributed to observable differences compared to their male-led counterparts. in the startups, what is contributing to this fundraising disparity? Why does the gap for Clearly understanding the cause of these equity increase post-acceleration? And why disparities requires further testing and do we see such a difference for debt? exploration. However, given the lack of immediately visible alternative explanations The data suggest that acceleration has an related to business, market or founder traits, outsized impact on the ability of male-led we hypothesize that the gender makeup of startups to raise equity, widening the gender the founding team, including the potential for gap for equity, and an outsized impact on investor bias and perception of risk when the female-led startups’ ability to raise debt, company is female-led, play a role. effectively removing the disadvantage 26 Equity When evaluating an investment opportunity, equity remains for those that are actually raising equity, investors receive a predetermined ownership share and therefore presumably comfortable with of the company for the amount of capital they diluting ownership in their startup. invested. As a result, they evaluate the potential of a startup to grow at a rate such that they can sell Another possible explanation is that investors their share in the startup for many multiples greater may perceive that exogenous factors outside than their initial investment (usually ten times the their control will limit the growth of startups original investment).33 This often requires that with female founders, and therefore limit their early-stage equity investors consider, among other return on investment. This could be the case, for things, the size of the market and the potential for example, if female-led startups are likely to face the startup to scale quickly into that market to more discrimination in the market, impacting their trigger a liquidity event and return of capital. Since ability to acquire customers, obtain regulatory early-stage startups often have little demonstrated approvals, and secure later rounds of financing, traction, equity investors often must rely heavily all of which are factors that could be at play in on the vision and potential of the founding team various markets. For example, a 2018 survey to capture a sizable share of the market.34 35 It also of nearly 300 female entrepreneurs found that requires a level of confidence that the startup will nearly 50% reported experiencing discriminatory be able to secure later rounds of financing to help behavior from vendors or suppliers, and in support an exponential rate of growth. some cases, that potential partners or clients showed a gender bias in their interactions.36 It Although there is no explanation for the gender might, therefore, seem reasonable for investors, financing gap in the quantifiable aspects of consciously or not, to perceive that female-led the startups that we evaluated, one potential startups might be less successful in the market explanation is that female-led startups may be and consequently factor this perception into their seeking equity less often than their male-led investment decisions. counterparts, if, for example, they have a desire to maintain greater ownership in their company. Yet, despite the potental perception that However, our analysis found that similar women may fare worse in the market, our percentages of male-led and female-led startups findings demonstrate that female-led startups raised equity capital (21% and 17%, respectively) generate more revenue per dollar of investment, post-acceleration. Further, when isolating startups indicating that market discrimination is not that have raised equity post-acceleration, male-led limiting their performance compared to their startups that participated in an accelerator raised male-led counterparts. A number of other studies three times more equity than their female-led have found similar evidence that female-led counterparts (and 2.4 times for those that did not companies outperform male-led ones in terms participate in an accelerator). This demonstrates of revenue. For example, one study found that that female-led startups seem to be seeking equity female-led startups generated 78¢ of revenue for at similar rates and that the gender financing gap every dollar of funding, while male-led startups 27 generated just 31¢,37 suggesting that the gender investors will, among other things, look at a financing gap is the result of more than the business’ cash flow, financial model, traction, perception of market discrimination. and collateral.41 By contrast, equity investors need a liquidity event, such as an acquisition or Overall, these findings indicate that investor initial public offering, to see a return of capital, bias may contribute to the gap. In fact, there a much riskier proposition.42 is a growing body of evidence indicating that bias influences how investors evaluate Acceleration may further reduce the perception of startups. For example, one study found that risk for female-led startups for debt investments. investors ask female entrepreneurs more risk- Accelerators often focus on helping startups focused questions, while investors ask their gain access to networks of investors and refine male counterparts more questions about their their business models, financials, and customer companies’ potential when pitched the exact value proposition.43 Because debt investors rely heavily on the financials of a business, the same business.38 Another study found that the support accelerators provide can help derisk the same video pitch for a startup was twice as investment and reduce the investors’ reliance on likely to get funded by investors when narrated evaluating the team, which may be more subject by a male voice than by a female one.39 to bias. However, business model support and access to networks, although important, Debt support does not seem to notably impact the What about the difference in debt? The gender perception of risk for equity investors, which financing gap for debt may be less than for rely much more on the potential for the startup equity pre-acceleration because debt is a less and founding team to capture a sizable share risky financing option, and one where the gender of the market, and trigger a liquidity event to makeup of the founding team may have less of return capital. an impact on how the startup is evaluated. Overall, this analysis suggests that both investor Although overall, the amount of debt startups bias and perception of risk play a role in the raise is generally less than the amount of equity gender financing gap. How and to what extent the — for example, male-led and female-led startups gender makeup of the founding team contributes that participate in an accelerator raise, on to this gap warrants further explanation. We plan average, 47% and 17% less debt than equity,40 to further test our hypothesis, and strategies to respectively — debt is a lower-risk investment overcome the gender financing gap, in the next structure for investors than equity. phase of this research. Debt investors evaluate whether to invest in a business based on the ability of that business to repay the investment within a predetermined time frame and at a predetermined interest rate. When assessing the risk of a business, debt 28 Key Insight 4: There are no clear accelerator program design elements that overcome the gender financing gap. In conducting this research, we were interested in exploring specific accelerator traits that could correspond with a reduction in the gender financing gap. While the traits most likely to correspond with a smaller gender financing gap — such as having a higher-than-average number of women on a selection committee and in mentor pools — are important for gender parity in acceleration, they have little effect on the overall gap. This suggests that accelerators need to do more to identify strategies to reduce the gender financing gap. We hypothesize that accelerators have a role to play in reaching beyond addressing startup behaviors, to influencing the behavior of investors, helping mitigate investors’ bias and risk perception. To evaluate strategies that accelerators could employ to reduce the gender financing gap, we identified program design variables that could logically correspond with how female-led startups fare in a program, such as gender makeup of the selection committee and length of program. We then calculated, within each cohort, the gender financing gap for both debt and equity post-acceleration, and ran t-tests to determine whether these program design variables corresponded with consistently larger or smaller gender gaps at the cohort level. PROGRAM DESIGN ELEMENTS AND THE GENDER GAP For the most part, we did not find any variables that were a clear solution to address the gender gap, with a couple of minor exceptions that warrant further investigation. TABLE 1: Program Design Variables’ Correlation to Gender Gap Equity Financing Gap Debt Financing Gap Program Variable Post-Program Post-Program Selection (women selectors, stated No significance No significance preference for women) Program Structure (duration, structured No significance Longer program duration* curriculum, women mentors) Program Investment (program makes No significance No significance direct investments) *Significant at the p<.10 level Selection FIGURE 12: Percentage of Companies with We found that a higher percentage of women Women on Founding Team (avg across programs) on the selection committee does correspond with significantly more female-led startups in 60% 56% 57% 45% accelerator applicant pools and cohorts.44 43% 40% However, while representation of women on 20% a selection committee correlates with greater 0% gender parity, it does not necessarily coincide Applicant Pool* Cohort* with a smaller gender financing gap. Less than 45% women selectors (N=77) At least 45% women selectors(N=110) *p<0.01 30 Program Structure There was only one minor program strategy that seemed to correlate with reducing the gender financing gap, though the correlation overall is relatively minor. The data suggest that program duration may play a role, as the debt financing gap is smaller for in-person programs that are longer than 80 days in person (the median program duration). Although the reasons for this have not been explored, we can hypothesize that longer programs help startups further refine their business models, which may further derisk the startup for debt investment (as described in Insight 3). THE ROLE OF ACCELERATORS IN ADDRESSING GENDER GAP The analysis found that there are no clear programmatic design elements that significantly address the gender financing gap. It is important to note that this was an initial analysis of programmatic design elements of different types of accelerators with a relatively small sample size, and the unclear findings suggest that this area warrants further exploration. We did not, for example, have enough data on the programs to know whether they were explicitly designed to address the gender financing gap. Overall, the findings suggest that accelerators need to develop more strategies to address the gender financing gap. Accelerators traditionally focus on startup-centric strategies — those that are meant to influence startup behavior. One potential strategy to explore is the role accelerators can play in more Effective intentionally influencing investor behavior. interventions will need to be Our hypothesis is that effective interventions more holistic, will need to be more holistic, reaching beyond focusing on addressing startup behaviors and focusing on influencing the influencing the behavior of investors. To more behavior of effectively address the gender financing gap, investors. accelerators have a role to play in helping mitigate investor bias and risk perception. 31 Recommendations Through this research, we were able to establish how accelerators are currently impacting the gender financing gap. We see that acceleration seems to have an outsized impact on the ability of male-led startups to raise equity, thereby increasing the equity gap, and an outsized impact on the ability of female- led startups to raise debt, thereby reducing the disadvantage female-led startups face when raising debt. We are not able to explain the gap based on any quantifiable aspect of either the startup or the founder, other than the gender make up of the founding team. Building on a growing body of research, this analysis suggests that the gender makeup of the founding team is strongly influencing the disparity in capital allocation by investors, suggesting that the potential for bias in investor decision making or a higher perceived risk for female-led startups, and that as the perceptions of risk decrease, so may the opportunity for investor bias. Addressing the gender financing gap will require going beyond the status quo: we will need to develop new strategies and test the effectiveness of those strategies compared to the established baseline. We need to innovate in our approach to make real progress toward gender parity in entrepreneurship. We have developed a series of hypotheses to test and explore throughout accelerator programs over the next year. As we continue to learn from testing these hypotheses, we will release a toolkit for accelerators and investors, outlining concrete actions that they can take to close the gender financing gap. We encourage interested accelerators and investors to do the same. Here are a few recommendations to help get started. 1 Pursue Strategies to Mitigate Investor Bias Investor bias, or at the very least the gender makeup of the founding team, is influencing the gender financing gap. Simple introductions between female-led startups and investors will not be enough to overcome this influence. We recommend that accelerators and investors identify strategies that focus intentionally and explicitly on mitigating investor bias. These strategies could include rethinking how investors make investment decisions, such as addressing the methodology or criteria, and who is at the decision-making table. They could also include priming investors with information to reduce this bias, for example through implicit bias training. 2 Reduce Perceptions of Risk Risk seems to have a positive relationship with bias: the more we can do to decrease the perception of risk, the more we may be able to reduce opportunities for bias. We recommend that investors and accelerators consider incorporating less risky financing products, like debt, revenue-share, or hybrid structures, and develop strategies to reduce perception of risk for female-led startups. 3 Influence Investor Behavior Most of the research on the gender financing gap recommends strategies that focus on altering entrepreneur behavior — for example, encouraging female-led startups to employ stereotypically “male” behaviors or answering questions differently than how they are posed when pitching their business. However, scholars know less about what investors can do to increase their investments in female-led startups. Although strategies on both sides of the equation are important to help early-stage startups become investment-ready, we recommend that investors and accelerators consider and test new ways of influencing investor behavior, providing investors with tools and strategies — not unlike the way they provide those things to startups — to make better, rational decisions. 33 Bibliography Abouzahr, Katie, “Why Women-Owned Startups Are a Better Bet,” Boston Consulting Group, June 6, 2018, https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx Baird, Ross, Victoria Fram, Rob Tashima, and Heather Strachan Matranga, “Capital Evolving: Alternative Investment Strategies to Drive Inclusive Innovation,” Village Capital, December 7, 2018, 5, https://assets. ctfassets.net/464qoxm6a7qi/729JKXLUPQQAFCJ9SeJlmy/277319a6983ae544f83dfdf87daca919/Capital- Evolving-Village-Capital-2.pdf Baum, Joel A.C. and Brian Silverman. “Picking Winners or Building Them? 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Conley, and E. Tory Higgins, “Male and Female Entrepreneurs Get Asked Different Questions by VCs - and It Affects How Much Funding They Get,” Harvard Business Review, June 27, 2017, https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and- it-affects-how-much-funding-they-get Lakhani, Mesh, “A Founder’s Guideline To Debt Financing,” Medium, April 10, 2018, https://medium.com/startup-grind/a-founders-guideline-to-debt-financing-14e99e9d58b6 Macmillan, Ian C., Robin Siegel, and P.N. Subba Narasimha. “Criteria Used By Venture Capitalists To Evaluate New Venture Proposals.” Journal of Business Venturing 1, no. 1, (1985): 119-128. https://EconPapers.repec.org/ RePEc:eee:jbvent:v:1:y:1985:i:1:p:119-128 34 MetLife Foundation, “Village Capital, MetLife Foundation, and PayPal Launch Finance Forward,” CSRwire, August 13, 2019, https://www.csrwire.com/press_releases/42342-Village-Capital-MetLife-Foundation-and- PayPal-Launch-Finance-Forward Miller, Paul and Kirsten Bound, “The Startup Factories: The Rise of Accelerator Programmes To Support New Technology Ventures,” NESTA, June 2011, 27, https://media.nesta.org.uk/documents/the_startup_ factories_0.pdf Mohan, Pavithra, “These Women Entrepreneurs Faced Gender Bias From Their Own Employees,” Fast Company, October 10, 2018, https://www.fastcompany.com/90241898/these-women-entrepreneurs-faced-gender- bias-from-their-own-employees PiggyVest, accessed February 11, 2020, https://www.piggyvest.com/about Radel, Holly, Shannon Stroud, Ann Marie Plubell, Jeff Schlapinski, et al., “Industry Statistics Mid-Year 2019: Emerging Market Private Capital Fundraising and Investment,” EMPEA, September 11, 2019, 17, https:// www.empea.org/app/uploads/2019/09/EMPEA-Industry-Statistics-Mid-Year-2019-Official-Public.pdf Roberts, Peter W., Abigayle Davidson, Genevieve Edens, and Saurabh Lall, “Accelerating the Flow of Funds into Early-Stage Ventures: An Initial Look at Program Differences and Design Choices,” Global Accelerator Learning Initiative, May 24, 2018, 7, https://www.galidata.org/assets/report/pdf/Accelerating%20the%20 Flow%20of%20Funds%20into%20Early-Stage%20Ventures.pdf Ten Years First Round, accessed February 11, 2020, http://10years.firstround.com/ U.S. Small Business Administration Office of Advocacy, “Venture Capital, Social Capital and the Funding of Women-Led Businesses,” April 1, 2013, https://advocacy.sba.gov/2013/04/01/venture-capital-social-capital- and-the-funding-of-women-led-businesses/ Wickham, Phil, Anna F. Doherty, Laura L. Neil, and Leslie F. Peters, “The Rising Tide: A ‘Learning-By-Investing’ Initiative to Bridge the Gender Gap,” Kauffman Fellows Report, July 12, 2016, 53, https://www. kauffmanfellows.org/wp-content/uploads/KFR_Vol7/Juliana_Garaizar_vol7.pdf 35 Endnotes 1 Baird, Ross, Victoria Fram, Rob Tashima, and Heather Strachan Matranga, “Capital Evolving: Alternative Investment Strategies to Drive Inclusive Innovation,” Village Capital, December 7, 2018, 5, https://assets. ctfassets.net/464qoxm6a7qi/729JKXLUPQQAFCJ9SeJlmy/277319a6983ae544f83dfdf87daca919/Capital- Evolving-Village-Capital-2.pdf 2 International Finance Corporation, Oliver Whyman, and RockCreek, “Moving Toward Gender Balance in Private Equity and Venture Capital,” March 7, 2019, https://www.ifc.org/wps/wcm/ connect/79e641c9-824f-4bd8-9f1c-00579862fed3/Moving+Toward+Gender+Balance+Final_3_22. pdf?MOD=AJPERES&CVID=mCBJFra 3 Abouzahr, Katie, “Why Women-Owned Startups Are a Better Bet,” Boston Consulting Group, June 6, 2018, https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx 4 PiggyVest, accessed February 11, 2020, https://www.piggyvest.com/about 5 MetLife Foundation, “Village Capital, MetLife Foundation, and PayPal Launch Finance Forward,” CSRwire, August 13, 2019, https://www.csrwire.com/press_releases/42342-Village-Capital-MetLife-Foundation-and- PayPal-Launch-Finance-Forward 6 Baird, “Capital Evolving”. 7 Baird, “Capital Evolving”. 8 Hwang, Victor, Sameeksha Desai, and Ross Baird, “Access to Capital for Entrepreneurs: Removing Barriers,” Ewing Marion Kauffman Foundation, April 1, 2019, 6, https://www.kauffman.org/-/media/ kauffman_org/entrepreneurship-landing-page/capital-access/capitalreport_042519.pdf 9 Radel, Holly, Shannon Stroud, Ann Marie Plubell, Jeff Schlapinski, et al., “Industry Statistics Mid-Year 2019: Emerging Market Private Capital Fundraising and Investment,” EMPEA, September 11, 2019, 17, https:// www.empea.org/app/uploads/2019/09/EMPEA-Industry-Statistics-Mid-Year-2019-Official-Public.pdf 10 International Finance Corporation, “Moving Toward Gender Balance in Private Equity and Venture Capital,” 32. 11 Wickham, Phil, Anna F. Doherty, Laura L. Neil, and Leslie F. Peters, “The Rising Tide: A “Learning-By- Investing” Initiative to Bridge the Gender Gap,” Kauffman Fellows Report, July 12, 2016, 53, https://www. kauffmanfellows.org/wp-content/uploads/KFR_Vol7/Juliana_Garaizar_vol7.pdf 12 Abouzahr, “Why Women-Owned Startups Are a Better Bet.” 13 Ten Years First Round, accessed February 11, 2020, http://10years.firstround.com/ 14 Roberts, Peter W., Abigayle Davidson, Genevieve Edens, and Saurabh Lall, “Accelerating the Flow of Funds into Early-Stage Ventures: An Initial Look at Program Differences and Design Choices,” Global Accelerator Learning Initiative, May 24, 2018, 7, https://www.galidata.org/assets/report/pdf/Accelerating%20the%20 Flow%20of%20Funds%20into%20Early-Stage%20Ventures.pdf 15 Roberts, 2018, 5. 16 Roberts, 2018, 24. 17 Global Accelerator Learning Initiative, “Entrepreneurship Database,” accessed February 11, 2020, https:// www.galidata.org/entrepreneurs/ 18 We will note any changes in the sample size based on the type of analysis in the report by indicating “N” in each graph. 19 This includes startups that were rejected from the accelerator program, as well as those that ultimately decided not to participate or complete the program for other reasons. 20 Sample size reduces significantly due to drop-off in number of survey respondents given the self-reporting nature of surveys. 36 21 We decided to evaluate the gender differences in two groups: all men and at least one woman, rather than dividing into three groups: all men, all women, mixed gender, to both align with how the gender financing gap is commonly evaluated in the private equity industry and to maintain similar sample sizes between the two groups. 22 Note: because the surveys rely on self-reported data, respondents may have captured the amount of capital they raised through convertible notes, which is a debt-like financing structure that converts to equity upon an equity financing round, in either the debt or equity fields. Because convertible notes are intended to become equity, we anticipate that most founders captured as equity, but are unable to verify. 23 International Finance Corporation, “Moving Toward Gender Balance in Private Equity and Venture Capital,” 32 24 N = 2122; p > 0.00 25 N = 2122; p > 0.031 26 N = 2122; p > 0.000 27 N = 1448; p > .0039. Note: Although the findings for female-led startups that completed a program were not statistically significant, when comparing to the statistically significant findings that female- led startups that did not participate in a program were disadvantaged combined with the difference in the statistically significant increase in debt raised between female-led startups that participated and those that did not, we can draw the conclusion that the disadvantage for female-led startups seems to disappear when they participate in an accelerator. 28 It is worth noting that, generally speaking, accelerators tend to attract tech and tech-enabled businesses at relatively similar stages and with relatively similar growth profiles. This is different than a dataset analyzed from financial institutions that might comprise a wide variety of entrepreneurs, from micro and small businesses to high-growth tech-enabled startups. 29 Roberts, Peter W. and Saurabh Lall. Observing Acceleration: Uncovering the Effects of Accelerators on Impact-Oriented Entrepreneurs (London: Palgrave Macmillan, 2019). It is important to note that other studies have attributed a portion of the gender financing gap to startup and entrepreneur characteristics like sector, intellectual property, and founder experience. The methodology in those studies differs from the one used in this research, particularly in how startups were categorized. 30 N = 999; p > 0.065 31 N = 999; p > 0.004 32 N = 1141; p > 0.036 33 FundersClub, “Startup Equity Investments,” accessed February 11, 2020, https://fundersclub.com/learn/ guides/understanding-startup-investments/startup-equity-investments/ 34 Macmillan, Ian C., Robin Siegel, and P.N. Subba Narasimha. “Criteria Used By Venture Capitalists To Evaluate New Venture Proposals.” Journal of Business Venturing 1, no. 1, (1985): 119-128. https://EconPapers. repec.org/RePEc:eee:jbvent:v:1:y:1985:i:1:p:119-128 35 Burns, Allie, Robert Tashima, Heather Strachan Matranga, “Flipping the Power Dynamics: Can Entrepreneurs Make Successful Investment Decisions?” Village Capital, January 1, 2019, 10, https:// downloads.ctfassets.net/464qoxm6a7qi/wzv3Ib30qboso0eyp0Dfu/b64d1af9335a4546420ac277f49845d4/ Flipping-the-Power-Dynamics-Village-Capital.pdf 36 Mohan, Pavithra, “These Women Entrepreneurs Faced Gender Bias From Their Own Employees,” Fast Company, October 10, 2018, https://www.fastcompany.com/90241898/these-women-entrepreneurs- faced-gender-bias-from-their-own-employees 37 37 Abouzahr, “Why Women-Owned Startups Are a Better Bet.” 38 Kanze, Dana, Laura Huang, Mark A. Conley, and E. Tory Higgins, “Male and Female Entrepreneurs Get Asked Different Questions by VCs - and It Affects How Much Funding They Get,” Harvard Business Review, June 27, 2017, https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by- vcs-and-it-affects-how-much-funding-they-get 39 Brooks, Alison Wood, Laura Huang, Sarah Wood Kearney, and Fiona E. Murray. “Investors Prefer Entrepreneurial Ventures Pitched By Attractive Men.” Proceedings of the National Academy of Sciences of the United States of America 111, no. 12 (March 2014): 4427-4431. https://doi.org/10.1073/pnas.1321202111 40 The amount of debt reported in this dataset could also reflect debt that is intended to convert to equity with a financing round, such as investment made through convertible notes or similar structures. The dataset relies on self-reported data and we do not have the level of granularity to know whether respondents characterize convertible notes or similar structures as debt or equity. 41 Lakhani, Mesh, “A Founder’s Guideline To Debt Financing,”, Medium, April 10, 2018, https://medium.com/ startup-grind/a-founders-guideline-to-debt-financing-14e99e9d58b6 42 Fundable, “The Types of Investor Funding,” accessed February 11, 2020, https://www.fundable.com/learn/ resources/guides/investor/types-of-investor-funding 43 Miller, Paul and Kirsten Bound, “The Startup Factories: The Rise of Accelerator Programmes To Support New Technology Ventures,” NESTA, June 2011, 27, https://media.nesta.org.uk/documents/the_startup_ factories_0.pdf 44 This analysis was conducted with application data for 187 programs in GALI’s dataset, to gather baseline information, rather than the 83 in our sample size, which was limited to programs that provided programmatic data, had at least two female-led and two male-led startups in the cohort, and supported for-profit startups. 38 IMAGE CREDITS: Cover: © Village Capital Page 9: © CoWomen Berlin Page 18: © Christina Morillo Page 31: © Christina Morillo 39 IFC 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A ifc.org Contact: Shruti Chandrasekhar, Head, SME Ventures & Startup Catalyst, schandrasekhar@ifc.org