Published on Feb 15, 2021 in Crowdfunding News
Something worth celebrating is happening in the world of finance. Equity crowdfunding is leveling the playing field for founders seeking funding, and as a result, women entrepreneurs are thriving in this space. This benefits everyone, but we still have a long way to go to fully empower female entrepreneurship.
Challenges and Opportunities Facing Female Founders
It’s 2021, and sourcing capital is still a huge barrier for female founders. Business-loan approval rates for women are 20% lower than for their male counterparts, and less than 3% of venture capital worldwide goes to women. Women start businesses with 53% less capital on average than men and see a 25% lower revenue than men in the same industry.
Why is this endemic imbalance still so notable? Most people chalk it up to the simple fact that people tend to fund people like them. Men fund men and women fund women, and there aren’t many women in investment. Women have to join the “boy’s club” and constantly battle stereotypes to get on the playing field with investors. The cycle, thus, is perpetuated, keeping women largely out of the game.
Gender Dynamics in Equity Crowdfunding
However, in recent years, an alternative way to raise funds has emerged, changing the system of access to capital, and seemingly leveling the playing field. We’re talking, of course, about equity crowdfunding.
While men still use this funding strategy on a much larger scale than women—and raise significantly more funds through it—women are much more likely to reach their campaign goals.
There are many theories as to why women’s crowdfunding campaigns perform better, but it’s widely believed that it’s because of certain attributes that hold a lot of appeal in the crowdfunding space and that tend to be stronger with women than men.
Traits that Predict Campaign Success
First of all, women tend to have a more holistic approach in their campaigns: they understand community-building, brand awareness, and the importance of the media and people supporting their ideas. Maybe this is due to the simple fact that in the past they’ve had to work that much harder to prove the validity of their ideas to get recognition and funding.
Ventures spearheaded by women are more often focused on impacting society and bringing about greater change. This basic motivation makes their business structure different, and it also makes them much more attractive to regular people hoping to make a profit with their investment but mostly hoping to support ventures that do good in the world.
Women inspire trust and engage more with their investors. Women tend to grow their ventures faster after receiving funding and are more responsible in paying back investors with their profits. Their upper hand in emotional intelligence gives them the ability to convey empathy and honesty, and communicate more clearly through their campaigns and with individual investors.
All of this creates more appeal for woman-led opportunities, but something else is also helping the cycle in financing start changing direction in favor of women: in addition to improving women’s odds at raising funds, it is also becoming clear that equity crowdfunding has the potential of making women the more powerful investors in this space. Why? Because they are the more powerful consumer: women make more purchasing decisions and are more often in charge of household spending.
Equal Access to the Market Builds a Resilient Economy
Breaking the cycle of gender discrimination in investing doesn’t just help women. Giving women worldwide better access to the capital they need creates jobs and helps build a more resilient, inclusive economy. Women use their resources to reinvest in their community, something that plays a huge role in propelling economic recovery in the post-COVID-19 world.
Growing Awareness of Endemic Imbalance
Equity crowdfunding helps to shine a clearer light on the endemic imbalance that fuels women’s limited access to funds through traditional routes. In this light, we need to readjust not only our perceptions and expectations but also the behavior and attitudes of our institutions towards female entrepreneurship.
This awareness also helps us understand why so few women still pursue crowdfunding campaigns, and why their expectations—and subsequently, their goals—of funding are so much lower. But most importantly, it shows us that when women and men get equal access to the market, women succeed, and everyone benefits.
Start Exploring Equity Crowdfunding
Seizing opportunities to empower female entrepreneurship and eradicate these barriers should be a priority of institutions, entrepreneurs, investors, women, and men. At Arora Project, we believe we have a significant role to play. Our team has supported numerous campaigns led by women, helping them go way beyond their fundraising goals. We hope to see many more women explore equity crowdfunding in the near future, and we are here to help them reach their goals—and surpass them.
So to all the ambitious women entrepreneurs out there, we say, simply: your time is now. Got an idea? Run with it. Build your social networks, learn social media strategy, and start asking people for money. And if all of that sounds daunting, we’re here to support you, every step of the way. Let us know how we can help your venture thrive, and in the meantime, check out our previous blog posts on equity crowdfunding to learn the basics.