Helping women rise: Foreign venture capital and female entrepreneurship

Access to external funding is a primary obstacle for female entrepreneurs must overcome. We hypothesize that the alignment in risk preferences between foreign venture capital firms (VCs) and female entrepreneurs makes foreign VCs more likely to hedge their cross-border investment risk by selecting female entrepreneurs, who tend to be risk-averse. Using a sample of 6,168 investment events involving VCs from 43 countries and regions investing in Chinese startups, we find that purely foreign VCs are more inclined to invest in female-led startups than purely local VCs. Furthermore, the tendency of foreign VCs to invest in female entrepreneurs is particularly pronounced in early-stage startups. Additionally, we observe no significant difference between syndicates composed of both foreign and local VCs and those consisting purely of local VCs in terms of their likelihood of investing in female-led startups. This study sheds light on the remarkable contribution of foreign VCs toward fostering female entrepreneurship and promoting gender equality, thereby providing important implications for policymakers, VCs, and female entrepreneurs.