Gender Differences in Venture Capital Funding on ABC's Shark Tank THESIS Presented in Partial Fulfillment of the Requirements
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Gender Differences in Venture Capital Funding on ABC’s Shark Tank THESIS Presented in Partial Fulfillment of the Requirements for the Bachelor of Science in Business Administration with Honors Research Distinction Degree in the Max M. Fisher College of Business of The Ohio State University By Tyler Jordon Hunt Finance Specialization in Business Administration The Ohio State University 2016 Dissertation Committee: Patricia West Ralph Greco Copyrighted by Tyler Jordon Hunt 2016 Abstract ABC Network’s reality television show “Shark Tank” gives entrepreneurs the opportunity to pitch their ideas to a panel of investors for the chance to receive funding. Each season more than 35,000 entrepreneurs apply to be on the show. Whether they receive an offer for funding or not, they still stand to gain the free advertising that comes with appearing on a show with more than seven million average viewers per episode. Although there are abundant resources for knowledge on Shark Tank, women in venture capital, and behavioral gender differences, sources are lacking on gender differences in venture capital funding on Shark Tank. The purpose of this research is to determine if differences exist in how entrepreneurs receive funding based on their gender. To analyze this, I utilized two publicly available datasets containing information on the pitches aired on the show. These datasets were cleansed and merged to form one data set with thirty- five variables spanning across four seasons and 235 pitches. I found that despite having comparable or better businesses than their male counterparts, women ask for lower valuations and accept deals at a lesser percentage of what they asked for compared to men. Explanations for these differences were considered in regards to the industry, sharks, entrepreneurs, and society. This information can be applied to benefit entrepreneurs in search of venture capital, and specifically, future contestants on the show. Going forward this research can be improved by coding for more variables and including data from the rest of the seasons. ii Acknowledgments First, I would like to express my sincere gratitude to my advisors Professor Ralph Greco and Dean Patricia West. I cannot thank you enough for your patience, motivation, and support throughout this process. I have learned much along the way and could not have done it without you two. I would also like to thank the countless other faculty that have contributed to my experiences at the Fisher College of Business and within the Honors Contract Program. I feel that my past four years at Ohio State have been supremely valuable and my only regret is that I did not do more during my time here. To my fellow classmates in the Honors Contract Program, thank you for the enjoyable past two years. I hope that we remain in touch and I wish you all the best in your future endeavors. Lastly, I would like to thank my parents for their unrelenting support of me in all of my undertakings. iii Vita May 2012 .......................................................Milton-Union High School May 2016 ......................................................B.S.B.A. Finance, The Ohio State University Fisher College of Business Fields of Study Major Field: Business Administration iv Table of Contents Abstract ............................................................................................................................... ii Acknowledgments.............................................................................................................. iii Vita ..................................................................................................................................... iv List of Tables .................................................................................................................... vii List of Figures .................................................................................................................. viii Chapter 1: Introduction ....................................................................................................... 2 Shark Tank: The Television Series ................................................................................. 2 The Sharks ....................................................................................................................... 2 The Pitch ......................................................................................................................... 3 Chapter 2: Purpose .............................................................................................................. 5 Chapter 3: Literature Review .............................................................................................. 5 Gender Differences ......................................................................................................... 6 Behavioral Differences .................................................................................................... 8 Chapter 3: Methodology ................................................................................................... 11 Data Preparation ............................................................................................................ 11 Correlation Matrix ......................................................................................................... 13 v Linear Regressions ........................................................................................................ 13 Chapter 5: Findings ........................................................................................................... 14 Chapter 6: Discussion ....................................................................................................... 17 Industry.......................................................................................................................... 17 Sharks ............................................................................................................................ 20 Entrepreneurs ................................................................................................................ 22 Women in Venture Capital ............................................................................................ 24 Society ........................................................................................................................... 26 Chapter 7: Limitations ...................................................................................................... 28 Chapter 8: Conclusions ..................................................................................................... 30 Future Research ............................................................................................................. 32 References ......................................................................................................................... 33 vi List of Tables Table 1: Gender Descriptive Statistics .............................................................................. 14 Table 2: Company Industries by Gender .......................................................................... 15 Table 3: Offer and Deal by Gender ................................................................................... 19 vii List of Figures Figure 1: Financial Metrics per Gender ............................................................................ 16 Figure 2: Deal Information ............................................................................................... 17 Figure 3: Valuation per Gender across Industries............................................................. 19 Figure 4: Descriptive Statistics per Shark Investment ...................................................... 22 Figure 5: Andrew Kavovit with BooBoo Goo .................................................................. 27 Figure 6: Shelly Ehler with Show No ............................................................................... 28 Figure 7: Investment Criteria ............................................................................................ 30 Figure 8: Linear Regression of Deal Valuation ................................................................ 37 Figure 9: Correlation Matrix ............................................................................................. 38 viii Chapter 1: Introduction Venture capital is funding provided to help new businesses reach their goals. Those that provide this funding receive an equity stake in the company and often earn a say in the management of the business (Morris 2007). The term was first used by John Whitney in 1946 and examples of venture capitalism are found throughout history including the beginnings of General Electric and the Transcontinental Railroad (Price 2014). Venture capitalism helps entrepreneurs get their ideas up and running and is still alive and well today as $58.8 billion was invested in venture capital in the United States in 2015 according to the National Venture Capital Association (Veghte 2015). Shark Tank: The Television Series ABC Network’s reality show “Shark Tank” takes this concept of venture capitalism and televises it to the masses. The show first aired in August of 2009 and is currently on its seventh season with over 130 episodes (ABC Network). Viewers watch as entrepreneurs pitch their business ideas to a panel of investors in hopes of receiving funding. These investors are referred to as “sharks”. Funding can be given in exchange for an equity stake in the company