The liability of gender: the effect of gender stereotypes on financing gaps for social startups

Most empirical evidence focuses on commercial startups seeking financing from equity/debt investors to suggest that male-led startups raise more financing than female-led startups due to investor biases. We extend this inquiry to explore whether and how entrepreneur gender impacts access to financing from equity, debt and philanthropy investors in the context of social startups. Drawing on gender role congruity theory and signaling theory and testing our hypotheses on a sample of 9,420 social startups that applied to 393 social impact accelerators globally, we find that without an accelerator endorsement, female-led startups raise less equity and debt financing, but more philanthropy financing as compared to male-led startups. However, with an accelerator endorsement, the financing advantages female-led social startups have in philanthropy financing are eliminated and contrary to our hypotheses, their disadvantages in equity and debt financing are increased. Can completing a social impact accelerator program help women social entrepreneurs better compete with their male counterparts as they seek external financing for their startups? This is the question we sought to answer and to do so, we examined a global dataset of social startups that completed social impact accelerator programs and studied their financing outcomes within one year of program completion. We find that prior to applying to a social impact accelerator program, women entrepreneurs raise more philanthropy financing when compared to their male counterparts but are at a disadvantage when seeking equity and debt financing. However, upon completion of the accelerator program, women entrepreneurs lose their financing advantage in philanthropy financing and surprisingly, their disadvantage when seeking equity and debt financing increases even more when compared to their male counterparts. These findings have academic and practical implications especially in the context of startup financing.