How Women Entrepreneurs may secure Funding for their Startups

When the debate about women’s struggle to break the glass-ceiling gained heat, many ambitious women turned their heads to entrepreneurship and looked beyond. But, female entrepreneurs realized that gender-bias was not going to spare them this easy.

The female-led ventures then began to realize that they have to struggle more than the male founders to get any form of financial backing. The discrimination was seen coming from the banks as well as the investors.

But sticking to their hopes, women now have a reason to rejoice as a new report suggests that women approaching crowdfunding platforms may have an easier time getting money here than men.

A study by Kelley School of Business, Indiana University, took three years of data and examined entrepreneurs’ gender, financial backing they received and funding success for 416 projects. And, it found that women were more likely than men to have their business ideas funded at crowdfunding platforms.

‘Women are Trustworthy’

The researchers also investigated why female-led ventures were more successful on the crowdfunding platform. It was found that the entrepreneurs who were perceived as highly trustworthy received the most funding. It was commonly found that women are considered to be more trustworthy and hence enjoyed higher access to the funds.

Related Article: Ten successful Women Entrepreneurs in India

The researching team created mock crowdfunding pitches and showed it to 73 amateur investors. They used psychological tests to determine the perception of each investor that how trustworthy they found each entrepreneur.

A PricewaterhouseCoopers 2017 report also found that women-led crowdfunding campaigns are 32% more effective and successful than male-led campaigns. Also, the pledge amount to women-fronted campaigns is 5% higher than men-led campaigns.

How Crowdfunding and Venture Capital are different

However, the past research studies show that venture capital investors will typically invest in men, as they are seen to be more competent.

However, because women haven’t been trusted to start successful businesses, women-led companies could raise only 3% of the total venture capital between 2011 and 2013.

But the perception of competence is less important in crowdfunding as it extends support mostly to an early stage project. It is more important for a funder to trust the individual in crowdfunding.

A study has outlined that crowdfunding provides a means for building trust with the funders. Hence, crowdfunding may improve broader entrepreneurial prospects for women in their business journey.

More platforms

Also since male investors are twice as likely to fund the male-led startups, women have started to team up to fund each other. One such fund is the Female Founders Fund. It is an early-stage fund which specifically invests in female-led companies.

Berkeley, in California, is beginning to develop entrepreneurship in school students. Many management students are conducting talks on entrepreneurship in schools. They are also helping school students to convert their innovative ideas into business.

In India, InnoLabZ has created a platform where entrepreneurs are encouraged to pitch their ideas to investors and network with other emerging businesses.

Many companies are also beginning to nurture entrepreneurship through funding and mentoring support. While some are choosing to promote female entrepreneurship, some are helping budding &student entrepreneurs to grow.

It is time for every entrepreneur to have alternative ways and explore innovative avenues to fund their business needs.

Related Article: Role of Gender Diversity in Modern Day Organizations