Will crowdfunding level the gender gap in entrepreneurship?
Part of our series on the future of Main Street
Women own more than one quarter of U.S. small businesses. In recent years, women have started new businesses at about twice the rate of men, according to data from the U.S. Census Bureau. And yet, women receive less than 5 percent of dollars doled out in traditional small business loans, according to The Washington Post.
This Harvard Business School analysis confirms what women in entrepreneurship fear: Investors prefer ideas pitched by men, even when the content of the pitch is exactly the same. Attractive men are the most persuasive of all.
This gender bias is a clear barrier to securing venture capital. That's one reason women are turning to crowdfunding websites like Kickstarter to get their businesses off the ground.
Many people believe that online, qualifications trump old-fashioned stereotypes, which makes the Kickstarter backing of women-owned small businesses seem promising. But does that philosophy actually have merit?
The available data looks good for women — but only up to a point. The good news for women is that 69.5 percent of women's Kickstarter projects get funded, compared to 61.4 percent for men, according to research done by the Hebrew University of Jerusalem with the site's data from April 2009 through March 2012.
But that's not the full story. Women had more success reaching their goals because they set goals thousands of dollars lower than men. Projects with one female author set a mean goal of $6,890.50, just over half the single male author's mean goal of $12,175.90. So women's ability to fund projects doesn't necessarily mean they turn out better pitches than men or that crowdfunding favors women. It may just mean that they needed fewer investors to sign on in order to meet their targets.
Just 22.5 percent of male investors' funds went toward women-run projects. Depending on how you want to look at it, that could be positive or negative. It'd be ideal if men and women funded each other liberally, and without regard for gender. But there's a significant bright spot here: Women consistently funding each other's ventures means a reliable way to start a business is emerging, one that doesn't necessitate obtaining approval from men in powerful positions.
Of course, there's more to consider than just Kickstarter and other mainstream crowdfunding sites like IndieGoGo and GoFundMe. PlumAlley is a niche website that takes the lesson of Kickstarter — that women can and will fund other women — and runs with it. Originally built as a way to highlight women's success stories in technology and business, PlumAlley became a crowdfunding platform in 2013.
"Find your audience and sector and do it well," founder Deborah Jackson told Fast Company. "We are building a community around projects women care about."
None of this is to say women should give up on other funding strategies, or that venture capitalists don't need to diversify the pool of business owners they fund. Gender inequality in business has no one-pronged solution.
Crowdfunding isn't a perfect answer to gender bias, either. Even so, the advent of crowdfunding plays an important part in leveling the financial playing field for aspiring businesswomen. For eager entrepreneurs, there's certainly no harm in logging on to ask for funding.