When growing and fundraising for a business, there are many boundaries to overcome for both men and women. However, recent studies show that women specifically face more difficulties raising money through traditional fundraising channels, and the gender gap in venture capital funding is getting worse. Stories of sexual harassment and discrimination towards female founders from venture capitalists (VC’s) also abound in the news.
Despite the difficulties women face when raising capital, a recent study showed women were “32 percent more successful at reaching their target than men” in online crowdfunding campaigns. This study highlights an opportunity for women who are looking to grow their businesses without the inherent biases that come with seeking venture capital. When it comes to fundraising, women may have more luck raising money in crowdfunding campaigns vs. venture capital.
Crowdfunding Vs. VC’s in General
Crowdfunding has provided new routes to funding for founders. Since the creation of Indiegogo in 2008, international platforms for seed-, rewards-, equity-, donation-, and loan-based crowdfunding have continued to gain steam across many platforms like Kickstarter, Crowdrise, and GoFundMe. Illinois, like many other states, also offers securities-based crowdfunding. The aforementioned study only focuses on seed crowdfunding, the largest of the sectors. For women, raising funds on a crowdfunding platform vs. via VC offers expedited market validation, a network of resources, and a direct line of communication with consumers.
There are still plenty of benefits of VC funding. VC investment could be better for a company seeking to scale and given the network/expertise of a board. The legitimacy of a venture capitalist’s support can be critical to a company’s success.
However, increasing competition from crowdfunding may now force VC’s to reconcile some embedded biases. Women have been underserved in venture capital. Only 7% of partners in the top 100 venture ﬁrms globally are women. There are also “widespread perceptions by ﬁnance providers that women-led businesses won’t provide a return or are riskier to invest in,” despite evidence showing startups with female founders grow faster.
The Report: “Women Unbound”
A two-year study by The Crowdfunding Center and PricewaterhouseCoopers analyzed 450,000 crowdfunding campaigns around the world on 9 different platforms. Although it seems to include some ‘cherry-picked’ data that feeds the WomenUnbound.com agenda, the report highlights an obvious issue. Some of the most interesting findings of “Women Unbound: Unleashing Female Entrepreneur Potential” include the following:
- Women are less likely to turn to crowdfunding and 50% less likely to seek outside funding for their company than their male counterparts.
- Seed crowdfunding campaigns led by women were 32% more successful in reaching their stated targets than those led by men across a wide range of sectors, geography, and cultures.
- In territories with the largest volumes of seed crowdfunding (the UK and the US), 20% of male-led campaigns and 24% – 26% of female-led campaigns reached their targets.
- On average, men tend to seek higher targets for their projects than women. But women’s more modest ﬁnancial goals are not correlated with their higher rate of success.
- Female-led projects achieve a greater amount per donor than male-led projects: on average each individual backer contributes $87 to women compared with $83 to men.
- Even in male dominated sectors such as tech, where there are 9 male-led campaigns to every 1 female-led campaign, female-led campaigns are still more successful.
Reasoning Behind the Data
So why do women seem to be more successful at crowdfunding? There are a few theories that corroborate the findings. First, in crowdfunding, decisions are made directly by the consumers and not (as the report terms them) “grey suits.” Second, a wider demographic and more female backers are attracted compared to traditional VC funding.
According to the PwC study, women also tend to be more relationship-focused and put more emotional marketing appeals into their fundraising requests. By using inclusive language and building a deeper connection with potential backers, women-led campaigns get better responses. Leveraging feelings is a well-known marketing tactic, and crowdfunding offers women the opportunity to utilize this to their advantage. As Kathleen Minogue, the CEO of Crowdfund Better stated in the PwC report, “Goodwill isn’t intangible. It has real commercial value that can be translated into online sales dollars now and the financial support of loyal customers in the future.”
An Opportunity to Do More
Despite the positive signs in the “Women Unbound” study, there’s more work to be done. The report raises serious questions about deep-rooted biases in the VC space that are restricting access to financial opportunity.
For female entrepreneurs seeking to fundraise, looking beyond traditional venture capital options and considering crowdfunding may offer more success. The report calls on “governments, funders, business advisors, educators, entrepreneurs and women and men to seize this opportunity to identify, quantify and remove the grey-suit-factor.”
When startups and entrepreneurs face challenges with forming and funding new ventures, raising capital, protecting intellectual property, and navigating the day-to-day legal questions that arise while running a business, Ziliak Law delivers insight from attorneys with industry experience.
Latest posts by WebContent (see all)
- Patent Protection Attorneys for Startups on Entrepreneur Day 2017 - November 21, 2017
- Top 5 Reasons to Seek Legal Advice When Growing Your Business - October 31, 2017
- FinTech Events, Chicago Style - September 10, 2017