Study Details Why Women Entrepreneurs Have Greater Crowdfunding Success

Crowdfunding has none of the barriers to success that often thwart women entrepreneurs pitching VC and angel investors.

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Study Details Why Women Entrepreneurs Have Greater Crowdfunding Success
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One of the biggest roadblocks to seeing a woman founder’s idea come to fruition is capital. Women brave several disadvantages in the venture capital industry, primarily as a result of the ecosystem skewed towards men due to the existence of men’s clubs. For women In tech, the challenge even extends the everyday workplace. The Elephant in the Valley survey of 200 women with a minimum of 10 years in tech found 67 percent reported they felt excluded from social or networking opportunities because of their gender, which renders several work environments hostile to women.

However, women have found crowdsourcing to be a refreshing and promising avenue to expand their narratives and pitch their ideas beyond their immediate networks. Crowdsourcing has gained so much momentum that it is now considered a major platform to drive women empowerment in areas from preventing sexual harassment to advancing culture preservation projects.  

Crowdsourcing has emerged as a positive platform for women. The National Women’s Business Council released a report -- Crowdfunding as a Capital Source for Women Entrepreneurs -- based on exclusive and original data from the two leading crowdsourcing platforms, Kickstarter and Kiva. The goal was to determine various predictors of success on crowdsourcing platforms for women business owners, and if those predictors of success were different than their male counterparts.

Related: How One Former Google Exec Is Driving More Funding to Female Entrepreneurs

Social networks are not equally effective on both platforms.

A woman’s unique network can play a positive role opening doors to meeting unmet capital needs on either Kickstarter or Kiva, but there are differences. For Kiva, a woman’s social network was a heightened predictor of success but was a negligible factor for men. The study found a mere 0.2 percent increase in the chance of success for a 10 percent increase in the number of Facebook likes.

Within the Kickstarter platform, social networks have a very substantial impact regardless of sex. The study found that a 10 percent increase in the number of shares on Facebook will lead to a 7.8 percent increase of a chance of success. Additionally, the average campaign with a video was 12 percent more likely to succeed, and on average campaigns offering limited rewards are 3 percent more likely to succeed compared to campaigns not offering a reward. Having a strong start on promotional activities yielded higher success rates for women. Including a video pitch and rewards for lending also contributed to success.

Given how women’s business networks limit their ability to access capital, social media networks can play a significant role.

Related: New Study Finds 5 Key Differences in How Male and Female Founders Raise Capital

Realistic goals are a big success factor.

Kickstarter is a reward-based, all-or-nothing (AON) platform, which means backers will receive a reward depending on the size and duration of their contribution. Startups and creative ideas thrive on this platform. However, the creator does not get to keep any money unless the target is met. Kiva’s platform is based on a peer-to-peer lending model, but since Kiva is a non-profit organization, lenders are reimbursed without interest. Kiva is also an AON platform, but it has a significantly higher rate of success for established businesses.

“I want to emphasize that individuals must set realistic goals in these all-or-nothing platforms. These goals should coincide with your network. For example, if an individual has a small network, a goal above $6,000 may not be realistic. If they would like to pursue a goal above $6,000, it is critical that they build up their social network size prior to the launch of the campaign and continue to leverage those networks throughout,” said Dolores Rowen, Associate Director of Policy and Research at National Women's Business Council.

The average capital funding goal on Kickstarter is around $20,000. That is likely because of the higher capital requirements for startups and innovative ideas. The average capital funding goal on Kiva was $5,000, possibly because most funding requests are from established business.

Related: Women Are Better Crowdfunders Than Men. Here's Why.

But don't set your goal too low.

Both platforms saw lower funding goals from women than from men. On Kickstarter, the average funding target for women was $14,552 per campaign. Men had an average funding target of $20,282. This difference indicates risk aversion by women entrepreneurs. This gender disparity in funding is even greater than if first appears when premiums -- the amount raised in excess of the goal -- are taken into account. On Kickstarter, the average premium raised by men was nearly twice as much as that raised by women (65 percent vs. 132 percent). That is a significant negative effect on capital needs given that women set lower targets to begin with.

Related: Women Raise More Money With Crowdfunding, Research Shows

Personal stories are a huge lever on crowdsourcing platforms.

The research looked at the textual pitch, length and the presence or absence of a video campaign. The results indicated personal stories are a powerful help in achieveing a crowdfunding goal.

Including a video pitch and rewards for lending also contributed to success on the Kickstarter platform. For Kiva, women want to focus on their personal narratives in detail and building a strong network that they can leverage, especially given the philanthropic nature of the platform.

Both platforms indicated that the first few days are critical to the success of the campaign. “Women entrepreneurs have influential and unique stories that they should leverage and promote -- individuals contributing to campaigns can resonate with these stories and often use a personal connection to determine their investment and viability, ” noted Rowen.

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