To common knowledge, investors have always shown consistent interest to pitches from men than women—although the content belongs to the same grade. With times changing, it is now quite obvious that crowdfunding has taken a distinct route by solemnly serving female-led ventures. By that example, Kickstarter has contrasted the institution of inequality by presenting women with fair exposure.
To start, Kelley School of Business at Indiana University studied Kickstarter’s three years worth of data to examine factors, including entrepreneurs’ gender, financial support and funding rate in a sample of 416 projects. The findings show that women were more likely to receive funding for their business ideas than men. PwC, in collaboration with The Crowdfunding Center published a report created in reference to two years of seed crowdfunding data from nine of the biggest crowdfunding platforms globally, which reads “that while men clearly use seed crowdfunding more than women, women are more successful at crowdfunding than men. 17% of male-led campaigns reach their finance target, compared with 22% of female-led campaigns. Overall campaigns led by women were 32% more successful at reaching their funding target than those led by men across a wide range of sectors, geography and cultures.”
With entrepreneurs sprouting more and more business propositions, there seems to be a subsequent demand for the crowdfunding market. Last year, Technavio’s latest report observed that global crowdfunding market is expected to grow at a CAGR of 17% during the forecast period between 2017 and 2021.
Business Wire reported that research analysts at Technavio have identified America to be ‘one of the most developed markets for crowdfunding’, particularly because the US crowdfunding accumulates more than 85% of the market share and ‘equity crowdfunding is gaining prominence’. In fact, US-based companies are eager to participate in crowdfunding because it is a step closer to access the market directly.
In addition to such possibilities that crowdfunding platforms bring—a good marketing campaign can often double the rate of funds collected, and therefore be able to build a global investor base. Keeping this in mind, entrepreneurs and businesses have realised that crowdfunding is ‘an investment opportunity’ provided ‘by many investors’, around the world. As Brijesh Ujjwal Doshi, a lead analyst at Technavio describes, it has even reached a point, where ‘the crowdfunding market in this region [America] overtook the venture capital model’, and, is often recognised as “the preferred source region [America] overtook the venture capital model’, and, is often recognised as ‘the preferred source of revenue for startup enterprises, entrepreneurs and established companies to generate funds.”
After realising that tens of thousands of investors show significant interest in crowdfunding, the question is—how is the market challenging the deep-rooted gender bias in investment opportunities? The perks of asking this question while gender bias still persists—is that researchers from Kelley University have investigated the reason behind women-led startups becoming more successful on Kickstarter. The team noticed an interesting pattern after creating mock crowdfunding pitches and videos, which were later shown to 73 amateur investors, settled in the eastern US, reported New York Post . Even psychological tests were used to understand investors’ perception of each entrepreneur, which was largely associated with trust. Entrepreneurs who were seen as trustworthy received the most funding. And they were mostly women.
For context, crowdfunding necessitates building trust with funders—which is perceived to be higher in women. Regan Stevenson, assistant professor of management and entrepreneurship at Kelley, said: “It’s surprising because previous research in the venture capital setting has shown that typically investors will invest in men, because they view them to be more competent.”
In the light of these findings, it seems, in crowdfunding “the perception of competence is less important because this is such an early stage in a project; what’s more important is whether or not, as a funder, you trust the individual behind it. And women, in particular, have an advantage because the gender bias amongst participants was that women are more trustworthy than men.”
That said, companies with women CEOs have raised only 3% of total venture capital between 2011 and 2013. According to a 2017 CalTech analysis, male-led startups have better stance in funding from male investors than female-led companies. To combat such imbalance “there have to be alternative ways for women to get started in business and crowdfunding is potentially one of those avenues.”