In 2009, crowdfunding emerged as a new and exciting option for entrepreneurs seeking capital. Today, more and more small business owners are turning to this “alternative” method to raise the money they need to start or grow their companies. As the SEC works to finalize their new regulations on crowdfunding, this funding opportunity is becoming an ever more viable solution for those who have struggled to obtain funding through bank loans and credit companies.
Five years ago, not many people had heard of crowdfunding. Now, with websites such as Kickstarter, Indiegogo, and GoFundMe, people can see a way to achieve their dream of owning a business. When the SEC does finally release their new rules, it will only serve to further legitimize this increasingly popular financial resource.
Crowdfunding has broken barriers for start-ups and individuals who would have been previously unable to get the money they needed to fund their projects. No longer are small businesses forced to seek credit lines from traditional lending sources. Now, as crowdfunding gains momentum, it continues to break barriers, this time taking a swing at the glass ceiling of the finance world. In this article, we take a look at women and crowdfunding.
WOMEN ON WALL STREET
Women have long been underrepresented in the world of Wall Street. According to the Wall Street Journal, 2.6 percent of women left the finance industry in the last 10 years, while men entering the field increased by 9.6 percent. This was despite the fact that the number of women in the overall work force increased by 4.1 percent in the same time frame.
In the world of crowdfunding, however, the playing field is a little more even. Though studies have shown that men are 40 percent more likely to get traditional venture-capital funding than women (USING THE SAME PITCH!!), research has also shown that when it comes to crowdfunding, there is a decided lack of discrimination against women. In fact, women run almost half of Indiegogo’s successfully funded campaigns. And women are present on both sides of the process: as both entrepreneurs and investors. Most recently, women-centric sites have been gaining popularity, linking female investors with women-run business projects.
WEBSITES FOR WOMEN
Whether or not separate sites for women are truly necessary is a debatable point. However, one thing that is certain is the positive intention behind the development of these sites. The goal is to create a place where women can network to find funding or investment opportunities and support other women in the process. Here is a partial list of these niche sites:
- Plum Alley started as a site that connected female consumers with products made by women, and since then, has expanded into a women-specific crowdfunding site. They use a rewards-based method that offers goods/services in exchange for financial contributions. They also offer access to financial experts that offer advice for women trying to fund new projects.
- Nap Time Startups is a site dedicated to “moms and women.” They recognized that women were less likely than men to receive funding for their projects, so they set out to change that. Nap Time Startups connects female investors and entrepreneurs, as well as offering support on both sides of the crowdfunding arena, with expert advice on smart investing and running a successful funding campaign.
- Bellevate is another site dedicated solely to women entrepreneurs. They use social media to help potential business owners find funding for their projects. Bellevate refers to their platform as “dreamfunding,” offering access to a “dream team” made up of the business owner’s own social media networks. Their approach is to limit the number of people who can access the business’s information, creating a safer environment for women seeking funding.
These are just a few of the sites that promote women helping women. They connect women who need money with those who have the means and desire to support them. The growing numbers of women-specific sites make it clear that crowd-funding will continue to change the face of the finance world, increasing the likelihood of women as investors and successful business owners.
WOMEN AS INVESTORS
According to Trish Costello, founder of crowdfunding site Portfolia, women are “largely overlooked as potential investors and market-makers.” This is despite the fact that they control 80% of consumer spending. Her site works to present women as consumer-investors and connect them with companies seeking funding.
Women have been proven time and time again to be savvy investors. Recently, a study by tax and advisory firm Rothstein Kass found that women-run hedge funds “outperformed those managed by men by six percentage points over a nine-month period in 2012” (money.usnews.com). Women are more thorough and likely to seek advice regarding their investments, making them more successful overall than their male counterparts. Unfortunately, due to the lack of female presence in the financial field, women often feel excluded or unable to participate. Crowdfunding, however, is changing that.
The accessibility of crowdfunding sites and the ability to identify deals online provides women with a safe space for investing. Being able to pick out and research their investments is empowering, and women are progressively joining the ranks of crowdfunding investors. In fact, Forbes.com and the Center for Venture Research report that the number of women “angels” (investors) is up 80% from 2012 to 2013, with women now making up 22% of investors, up from 12% the year before. And it probably comes as no surprise that these investors are seeking to support their own. Women-led crowdfunding campaigns have found success at every turn, largely due to the support of female investors who fund their projects.
WOMEN AS ENTREPRENEURS
Until recently, women-owned businesses started and grew with notably less outside funding money than male-owned companies. With the power of crowdfunding, that fact is rapidly changing. At Indiegogo, women raise more contributions and more overall money for their projects.
Crowdfunding does away with the traditional “pitch” to find funding. Ideas are presented in a virtual world that is (ideally) free of bias and allows the idea to shine, not the sex of the person who developed it. Add to this the increased audience, and you have much greater chances of being successfully funded.
Danae Ringellman, founder of Indiegogo, shares that “Women are nearly four times more successful when crowdfunding than raising capital through traditional means.” An overwhelming 47% of successfully funded campaigns on her site are run by women, compared to only 13% of female-owned businesses that successfully obtain venture capital funding.
The difficulties faced by women seeking traditional funding are only part of the reason why they are turning to crowdfunding. There are the numerous benefits that this option offers to entrepreneurs. Crowdfunding is simple and practical. The platform is user-friendly and there are numerous supports to help both women and men run successful campaigns. Funding is timely and you get access to millions of potential investors. It’s no wonder that women are turning to this accessible, socially-driven choice to fund their businesses.
Huffpost writer Kay Koplowitz sums it up nicely: “…crowdfunding is the democratization of capital, and in that regard, is positive for women who haven’t had access to capital on a parity basis with men.” It will be interesting to see if crowdfunding will continue to tear down traditional structures as it develops into a major force in funding and investing for the everyman. And woman.