Equity crowdfunding, an oasis for women entrepreneurs
The word “desert” refers to a “sandy or stony territory, which due to the almost total lack of rain lacks vegetation or has very little. Deserts are, therefore, inhospitable places where the lack of resources prevents life from prospering easily.
The world of entrepreneurship is no stranger to this term, especially in the case of women entrepreneurs. According to data from the Map of Entrepreneurship 2019, women only represented 17% of entrepreneurs in Spain a year ago. Just as in the deserts the lack of rain prevents the proliferation of new forms of life, in the entrepreneurial ecosystem it is the lack of time and funding that prevents a greater female presence.
The first problemis associated with prejudices that, despite slowly disappearing, are still present in society. Women are still considered in many cases as the ones in charge of taking care of the home and the family. This is hardly compatible with setting up a business from scratch.
Discourse and prejudices
In terms of financing, there are multiple factors that explain the gender gap in the entrepreneurial sector. When betting on a business, investors not only value the figures and forecasts. They also attach great importance to the speech and personality of the CEO. This is where women entrepreneurs find the greatest barrier to obtaining financing. The numbers only leave room for objective judgments, but when what is valued is the person, negative judgments (and prejudices) appear.
According to a study by HSBC Private Banking, one third of women entrepreneurs face gender biases when seeking capital for their business. For example, investors tend to think that women take their business as a part-time job or a hobby. These prejudices are greater when the investors are men. While the probability that a project led by a woman will be funded is 26%, it drops to 15% when investors are men.
The biases do not match the data. In Spain, only 48% of companies founded by women fail, while when the entrepreneur is a man the probability of failure increases to 66%. This does not mean that women are better entrepreneurs than men, since several factors influence the viability of startups. But the data seems to show that the prejudices faced by women entrepreneurs are unfounded. Prejudices that, in addition, are increased in the case of industries traditionally dominated by men, such as the brewery or technology.
The oasis of crowdfunding
Within this desert ecosystem, an oasis for women appears. By “oasis” we mean a place with vegetation and life found within a desert. This oasis in the field of financing is represented by equity crowdfunding. In this field, the success rate for women is 70%, while for men it is 61%.
Why doesn’t the difficulty for women to get financing seem to affect the crowdfunding sector? The main reason is the reduction of face-to-face relations with investors. They can access detailed project data from their laptop and thus decide whether to invest in the project, without the need to meet the entrepreneur in person. In this way, prejudices disappear from the equation and results vary.
Despite this encouraging data for the entrepreneurs, the reality is that in total terms it is the men who collect more through crowdfunding. Although financing rounds carried out by women have a higher probability of success, they only account for 35% of the total. This is not surprising considering that 83 out of every 100 entrepreneurs are men. Perhaps it is precisely equity crowdfunding that represents a turning point in changing this trend. The fact that it is known that there is a possibility of obtaining investment could encourage a greater number of women to become entrepreneurs.
At Fellow Funders we know first-hand the satisfaction that comes from successfully closing a round of financing for women entrepreneurs. From the Rocking Baby stroller startup to the Althaia brewery, many projects have obtained the financing they needed to get off the ground. Experiences that show that equity crowdfunding is an oasis to be explored for all women who want to undertake.