Crowdfunding is democratising finance by allowing women to access the same opportunities as men.
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 New Zealand women aged 18-24 are found to be more entrepreneurial than young men however they have a higher rate of failure (Unitec). A reason for this is female entrepreneurs have experienced undercapitalisation as a core issue. This is despite New Zealand offering a favourable environment for entrepreneurial activity, being ranked 5th on the Index of Economic Freedom, and boasting a high percentage of female entrepreneurs (37.7% of all New Zealand’s entrepreneurs).
According to the "NAB Special Report – The Lure of Entrepreneurship – Australia’s Start Up Culture", in Australia men (35%) are keener to start a business than women (29%) and 1 in 2 women declared that they would prefer to work for someone else, compared to just 36% of men. This data might reflect their concern in having continuity of employment post childbirth and the need to give more options and support for women that would like to access capital to start an entrepreneurial activity.
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. One positive example is American crowdfunding platform iFundWomen, that focuses on women-led startups and small businesses. The main goal of the platform is to close the gender funding gap so female entrepreneurs can get their businesses off the ground.
History has shown that women are almost four times more successful when they raise capital through crowdfunding rather than traditional means. The number of female-owned businesses that receive venture funding in the US is only 13%. Crowdfunding campaigns run by women meet their funding target at a rate of around 47% (Forbes) so if this route is undertaken it is often successful.
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 have 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. Furthermore, female entrepreneurs tend to engage with their investors more effectively, as they are often better communicators, are more emotive in their cause and are seen to be 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 - the platform is supportive and creates a community around the offer.
- 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 have the potential to become affluent investors in the crowdfunding marketplace. A benefit of this is risk aversion, which is more commonly associated with women, can prove to be a strength 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) which, as women investors are increasing, will lead to more and more female-led startups receiving funding. As this will reduce the number of women who have to pitch to a room full of male investors, we’ll see a decrease in gender bias as a result of crowdfunding platforms.
As crowdfunding changes the landscape of how capital is raised, it can also become a game changer for women. Female entrepreneurs will be 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 misconceptions and bias. With the number of both female entrepreneurs and investors rising in countries such as the US, it is now our job to provide a platform for New Zealand and Australian women to access the opportunities which will help their business ideas succeed.