Over the last seventy years, female labor market participation has increased significantly. Women’s representation in highly compensated occupations such as law, medicine, consulting, and investment banking has steadily improved. Yet, the gender diversity in venture capital has lagged significantly behind: On average, only about 8% of venture capital investors hired are women over the past three decades.
In this study, we examine the impact of the gender discrimination lawsuit Pao v. Kleiner Perkins on gender issues in the venture capital industry. We have two main findings: First, we show that the Pao trial causes a significant increase in the hiring of women investors in venture capital from 2015 to 2019. We find significantly stronger effects in states with greater awareness of the trial, as measured by Google search trends. Second, we find that the increased hiring of women investors in venture capital is an important driver leading to more funding allocated to companies started by women founders.
Ellen Pao, a junior venture capital partner, filed a discrimination lawsuit in 2012 against Kleiner Perkins Caufield & Bayers, one of the oldest venture capital firms in the Silicon Valley. It went to trial in February 2015, and a jury in San Francisco rejected her gender discrimination claim on March 27, 2015. The Pao trial was closely followed by many major media outlets such as the New York Times, the Wall Street Journal, Financial Times, and Forbes. It also drew significant attention from many US-based venture capital firms.
