Women in crowdfunding
Originally published on the Equitise Blog
(republished with permission)
As the world of finance has been, for a long time, seen as an ‘all boys club’, women have been marginalised in traditional forms of finance, venture capital and business angel investing. On average, women-owned firms start and grow their businesses with considerably less external financing compared to men (Department of Commerce US). In Australia, female entrepreneurs have experienced undercapitalisation as a core issue that undermining the success of growing their business. A 2013 study conducted by the (Australian Women Chamber of Commerce and Industry (AWCCI) of 3000 women entrepreneurs found that half of those surveyed required more funding to facilitate the growth of their business. The majority of those women have started their venture with less than $5000 worth of capital.
Crowdfunding platforms, however, now offer female entrepreneurs the chance to promote and grow their business by providing access to capital. By providing such opportunity, crowdfunding democratises finance by placing women on a level playing field with men. Moreover, with a growth in female entrepreneurship in Australia and the amount of women starting businesses increasing by 8.9% in 2013 (AWCCI), access to crowdfunding platforms in Australia will play a key role in providing capital to women. Women are almost 4 times more successful when crowdfunding than raising capital through traditional means. The number of female-owned businesses that receive venture funding in US is only 13%, however the number of crowdfunding campaigns run by women that meet their funding target is around 47% (Forbes).
Despite the lower number of women on crowdfunding platforms, women entrepreneurs are generally more successful in their campaigns. They are shown to be more energetic than men, receive more investors per campaign and a higher average donation value, raising 10.75% more money than male run campaigns. Women are also noted to be able to grow their business faster after receiving funds and more conservatively. Furthermore, female entrepreneurs tend to have a greater advantage at engaging with their investors, as they are perceived to be better communicators, more emotive and trustworthy.
Women are turning to crowdfunding because it is:
- Simple – doesn’t require a large loan or venture capitalist backing.
- Fast – the average crowdfunding campaign runs for just over a month.
- Able to attract vast numbers of investors.
- Friendly – supportive platforms and community.
- Connecting – entrepreneurs are able to reach investors and communities that are usually out of their reach and make friends along the crowdfunding process
- Able to create business traction by exposing crowdfunding campaigns to media, communities, investors and consumers.
On the investing side, the number of women investors has also been rising. As women have the majority of purchasing power in families, they are the most powerful consumers and consequently will become affluent investors in the crowdfunding marketplace. Risk aversion, which is more commonly associated with women, can prove to be a strengths in crowdfunding as it will enable conscientious decision making, exercising the wisdom of the crowd. Moreover, as people are noted to commonly fund people like them, men fund men and women fund women (Forbes). With not having to pitch a room full of male investors, limiting the gender bias is a key benefit of crowdfunding platforms.
As crowdfunding changes the landscape of how capital is raised, it can become a game changer for women. Female entrepreneurs are given the chance to reach their full potential and succeed within the world of business, resulting in more competition, quality and choice. As gender, education, race and age are removed from the pitch, the entrepreneur behind the crowdfunding campaign is left to rely on the will of the audience. Consequently, crowdfunding platforms are able to eliminate economic and preconception challenges women face when endeavouring to raise capital and start a business. With the number of both female entrepreneurs and investors rising marginally in countries such as the US and UK, it is now our job to provide a platform for Australian women to flourish and opportunities to see their business ideas succeed.