Equity Crowdfunding + Women Entrepreneurs (Infographic)
According to new research, Stand Out In the Crowd: How Women (and Men) Benefit From Equity Crowdfunding, women entrepreneurs are not making use of crowdfunding platforms to raise equity financing publicly.
Equity crowdfunding pools money from a group of investors via online platforms, using social media and other marketing. Currently, only friends, family and accredited investors (a.k.a. wealthy people) in the United States can receive shares in the company in exchange for their investment. They can do this through websites such as AngelList, CircleUp, Crowdfunder, and Portfolia. Equity crowdfunding has the potential to level the playing field for anyone raising and investing money, but its impact may be the greatest on under-represented groups, such as women and minorities.
Yet, of all companies raising equity crowdfunding publicly, only 18% are women-led companies and 17% are women-owned companies, according to Crowdnetic, which aggregates data from nearly 20 equity crowdfunding platforms. Of the companies seeking angel investors offline, 23% are women-owned companies, according to the Center of Venture Research.
Women entrepreneurs reported confusion about:
- Verifying accreditation of investors: Many crowdfunding platforms do this for you. Or, you can hire a third party.
- Financial reporting: For accredited investors, financial reporting is pretty simple — financial statements from whatever software system you’re using will suffice. It can get more complicated when non-accredited investors are involved.
- Expense: Using the platform and doing marketing costs money, but raising money in a concentrated period of time, which has the added value of increasing awareness of your products and services, may outweigh the costs. You can cover these costs with the money you raise.
Interestingly, the data and interviews with experts and women entrepreneurs who have succeeded at raising equity financing publicly through crowdfunding reveals that women have the right skills to succeed.
No matter the gender of the founding team, success rates for companies meeting their capital goals through equity crowdfunding are similiar: 23% for all companies, 24% for women-led companies, and 23% for women-owned companies, according to Crowdnetic’s database. Fundraising success rates fluctuate from year to year, but women who adopted crowdfunding early were more successful than those who raised money privately—only 19% of women-owned businesses were successful in private raises, according to the Center of Venture Research. CircleUp reports that women entrepreneurs are more successful than their male counterparts. “As of 2014, women-led businesses closed their rounds successfully at a 21% higher rate than men on the platform,” said Ryan Caldbeck, founder and CEO of CircleUp.
The prerequisite skills for success include project management, marketing, storytelling, communicating clearly without jargon, making realistic projections, aligning words with actions (meeting milestones), being frank when mistakes happen and, of course, being excellent at follow up.
Emerging best practices include building your network before you need it, making a compelling video, emphasizing validation—which could be customers, partners or media mentions—and showing momentum.
You can get more tangible and actionable information including industry benchmarks, case studies, key insights from subject matter experts, and advice from women entrepreneurs who have successfully used crowdfunding by downloading Stand Out In the Crowd for free.