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Why Crowdfunding is a Good Option for Female Entrepreneurs

This week many countries around the world are celebrating International Women’s Day. March 8th is a day to celebrate the social, economic, cultural and political achievements of women, but whilst significant gains have been made in terms of gender equality there is still more to do, especially in terms of women in business and entrepreneurship. While equally or even more ambitious when it comes to starting a business, women are still underrepresented in the entrepreneurial and startup world.

When it comes to starting a business, the obstacles faced by women are unique and numerous. The most notable and well documented of these obstacles being access to capital, but tides are turning and we are seeing an increase of opportunities available to female founders. One such opportunity is the growing popularity of crowdfunding. As a more democratic approach to raising funds, entrepreneurs have the opportunity to go straight to the source to access the capital necessary to launch their business. And, female entrepreneurs seem to be excelling in this method of raising capital because it is more in line with their natural ability and values.

Here are 3 reasons why female entrepreneurs should consider crowdfunding their business, project or service.

Less access to traditional sources of capital

Globally only 5–10% of women owned businesses have access to commercial bank loans and they account for less than 5% of venture capital (VC) investment. The male dominated world of VC and private equity firms results in less funding for female led startups for many reasons. One study found that traditional firms “don’t understand the businesses minorities and women are attempting to start, since they haven’t been exposed to them, and therefore interpret them as riskier”. Some research also finds that the performance of female-led startups is markedly worse than that of male-led startups. This finding has led to gender bias in terms of the perceived competencies of female entrepreneurs. However, findings of this nature only represents half of the picture as it is also true that the performance gap between male and female startups can be eliminated when female led companies are financed by VCs with female general partners signifying that it is not the competence of female led startups leading them to find less success but the system in which they are operating.

So, where does that leave the female startup looking for the initial capital needed to get her business up and running? She has heard that female led businesses have lower success rates, she does not like the idea of committing to a bank loan or the idea of pitching in the first place, much less the idea of pitching to a room full of men who already perceive her as likely to fail. And, with only 12% of angel investors being women there are not that many out there to invest in her and to mentor her.

Women see high levels of success with rewards based crowdfunding

Because crowdfunding democratizes access to capital and allows potential customers to decide which companies to support, female entrepreneurs find a higher level of success than in traditional methods of raising funds to get started. This study found that female success rates for crowdfunding campaigns was 69.5% compared to men at 61.4%. And another found female-led campaigns to capture 1.3 more contributors and 10.75% more funding.

So, what does this all mean? Well, if the potential customers are in the power seat, then it means that female startups are striking a chord within the market. A successful campaign can tap into the major benefits of crowdfunding beyond just getting funded — all without giving away equity in your business or marrying a bully of a bank loan. This is the beginning of a sustainable growth model that is customer centric — an excellent foundation for your business.

A sustainable growth model

There are more benefits of a successful crowdfunding campaign beyond just the funding. Executing a successful campaign lays the groundwork for a business to thrive. Because women strive for steady, profitable growth trajectories over equity investment, crowdfunding helps to validate the product or idea, and build a community of supporters. With minimal cost, these two key components to success are met and female entrepreneurs are able to raise funds in a way that feels more natural — by going straight to the consumer and building a community.

Being more conscious of obstacles and risks is typical of women-led business but it this is not necessarily a bad thing. In fact, there is evidence that female entrepreneurs have higher incomes than male entrepreneursand often fare better in market driven economy. With crowdfunding, you’re going directly to the market. Female entrepreneurs are finding that they excel when it comes to telling their story and connecting with customers at an emotional level.

Interested in launching a crowdfunding campaign? Learn more about more crowdfunding by reviewing some frequently asked crowdfunding questions or email us at contact@nextchapter.com.hk to set up a free one on one consult.