We knew it was true, or at least we hoped so. But a new report shows how crowdfunding is leveling the playing field for women entrepreneurs.
The report, Stand out in the Crowd: How Women (and Men) Benefit from Equity Crowdfunding, found that women are achieving a higher success rate raising investment capital online than they are through traditional offline channels: 24% for online compared to 19% for offline. CircleUp, an equity crowdfunding platform that targets emerging consumer brands, reports that women-led businesses closed their rounds successfully at a 21% higher rate than men on the platform.
“Crowdfunding, specifically equity crowdfunding, is leveling the playing field for female founders with skills, ability and ambition to scale companies, who might have previously encountered pushback and closed doors from the traditional boys’ club of VC firms,” said Geri Stengel, founder of Ventureneer and the author of the report. Fittingly, she raised partial funding for the research on PlumAlley, a rewards-based crowdfunding site for women.
The findings bolster a growing body of data that show women have been successful with rewards-based crowdfunding, where backers contribute money in return for rewards but no financial stake. For example, on Kickstarter, the popular rewards-based crowdfunding site, women are 13% more likely to meet their goals than men—even for technology projects. They do even better on Indiegogo, where women are 61% more likely than men to meet their goals.
The gains for women have come partly as a result of the JOBS Act, legislation passed in April 2012 that was intended to make it easier for small and growing companies to raise capital, particularly through online crowdfunding. But the law has been slow to roll out. Today, entrepreneurs can only raise money from accredited (aka wealthy) investors, through a part of the JOBS Act known as Title II. A provision of the Act that would open investment crowdfunding to all investors (Title III) is stalled in S.E.C. rulemaking.
The findings are good news for women entrepreneurs. Despite creating companies and jobs at an impressive pace— and delivering a higher return on investment than their male peers—they are held back by a lack of capital. Women entrepreneurs tend to raise less money than men, partly because venture capital remains a clubby, male-dominated world. In fact, they are 50% less likely to seek outside funding.
Crowdfunding allows entrepreneurs to bypass traditional gatekeepers and reach out to their affinity groups and social networks for funding.
But while crowdfunding holds promise for women and others that lack access to conventional funding sources, the report suggests that they are not yet taking full advantage of it.
Only 18% of companies raising equity through crowdfunding are led by women, and 16% are women-owned, according to Crowdnetic, which tracks investment crowdfunding. Of the companies seeking angel investments offline, 23% are women-owned companies.
This is not just an issue for women. When half the population cannot take full advantage of economic opportunity, that hurts us all. As Sally Krawcheck, a former Wall Street executive and the head of the women’s network Ellevate has pointed out, if women were as economically engaged as men in the economy, the nation’s GDP would be 7 to 9 percentage points larger.