Bias against female entrepreneurs persists
According to the U.S. Senate Committee on Small Business and Entrepreneurship, women who want to start their own business receive fewer loans than men looking to do the same. While 30 percent of small businesses in America are owned by women, they receive only 17 percent of the total SBA loans and 16 percent of conventional loans, according to the Senate Committee report.
Anu Duggal, founder of Female Founders Club, says that venture capitalists are giving only 15 percent of their capital to women entrepreneurs, in spite of women’s advancement in the skills required for founding a successful start-up. The situation is not limited to the U.S. A recent article in Forbes cites a Compass research study that shows only 10 percent of UK entrepreneurs are women. However, when looking at success statistics, the study found that a higher percentage of successful companies are headed by women.
These statistics confirm a general bias against women by conventional lenders. Even though women are taking their ideas to market more than men, and have a proven track record of success, they still face significant challenges when it comes to securing capital. This gender gap has caused women to search for alternatives to conventional financing and crowdfunding has proved to be one tool that is leveling the playing field.
Crowdfunding is negating the disadvantage women face in securing capital
Data from CircleUp, an online platform that connects entrepreneurs with investors, shows that whereas women entrepreneurs receive only 4 percent of small business loans, or 7 percent of venture capital investments, they are securing 34 percent from online investment platforms. While this is not parity quite yet, it does show a much more favorable scenario for women entrepreneurs. CircleUp founder Rory Eakin posits that perhaps the factor making a difference is the relative gender anonymity of the internet. When a female entrepreneur goes into a bank to seek a loan, it is more obvious that a woman is opening the business. While the transparency required by online funding platforms requires information about the company’s founder and staff, it is not the first thing that an investor sees. Instead, an investor sees the product or service that will be provided and is inspired by this. The fact that the company will be opened by a woman is secondary.
A good example is Three Weavers Brewing, founded by Lynne Weaver. She turned to Kickstarter to secure the capital she needed to start her California-based beer brewery, a field dominated by men. Around the beginning of the year, she and her partners set a fundraising goal of $25,000 that would pay for a tasting room that would also double as a venue for local artists to display their creations. By April, they more than met their goal, raising capital from 166 investors to the tune of $25,422.
Crowdfunding platforms such as Kickstarter and Indigogo offer a more democratic process and level the playing field across gender
University of Pennsylvania’s Wharton School of Business studied this phenomenon of crowdfunding success for women. They found that of the Kickstarter projects they tracked that sought funding of at least $5,000 between 2010 and 2012, women were 13 percent more likely than men to meet their fundraising goal.
The success of crowdfunding is leading to a growth of women entrepreneurs and female investors. The nature of crowdfunding as a platform for expression of ideas and building community appeals to women. The format matches their natural strengths and therefore founders feel more comfortable pitching their ideas. Female investors appreciate the networking and community-building aspect, as well as the opportunity to invest in women. Crowdfunding is breaking down the barriers for women to enter traditionally male-dominated industries such as technology and fitness.