Beyond the Pitch: Role of Founders’ Characteristics in Startup Funding

Abstract

While investigating founders’ characteristics important for startups’ funding and analyzing more than 1900 funded US startups with the help of CrunchBase dataset spanning 2017-2022, I find that companies with diverse founders enjoy less funding. It happens because the venture capital industry is dominated by less diverse investors who bring down the total funding volume for such new ventures. I show that a degree from a technical university can help founders raise funding for their respective startups because venture capitalists prefer to see someone with technical background at the helm of a new business considering that three out of five top industries for startups are technical. Interestingly, graduating from top schools such as Ivy League universities does not substantially help founders achieve the same goal of increased funding. COVID-19 pandemic can make funding even harder for startups with diverse founders, while enacting laws such as SB826 in California demanding to have at least one female representative on the board of directors can, on the other hand, improve the situation.