How Women Can Beat Fundraising Bias

Posted on  

"How Women Can Beat Fundraising Bias"

Kickstarter

CREDIT: Shutterstock

Women are often shut out of traditional forms of funding if they want to start a company. But a new study finds that they are more likely than men to get backing through crowdfunding sites like Kickstarter.

On the raw numbers, Jason Greenberg of New York University and Ethan R. Mollick of the University of Pennsylvania found that projects founded by women-only teams have a 40 percent better chance of meeting their fundraising goals than male ones. The female advantage held true even after they took industry, Facebook network size, and the quality of pitches into consideration: women were still 13 percent more likely to successfully raise money.

Based on their data, the Wall Street Journal created a graphic to illustrate how successful female-created projects are in crowdfunding:

MK-CO560_SBWOME_G_20140812154807

This is notable because, as the researchers write, crowdfunding represents a place “where
traditional financial gatekeepers such as venture capitalists and angel investors do not operate.”

What might explain this phenomenon? They find that it’s not necessarily because there are more female founders to back women-led projects, but because a small number of female backers give a lot to women raising money for technology projects, where women tend to be underrepresented. These backers represent “an activist subpopulation of female backers that disproportionately supports female founders in areas in which women are historically underrepresented,” the researchers note. But they note that this conclusion is “suggestive but not causal” due to the nature of the data.

It also suggests that women don’t suffer in raising money from more traditional sources because they are bad at making pitches or coming up with innovative ideas. If given a chance without the traditional gatekeepers, they outperform. But with the gatekeepers, things look very different. Women got just 13 percent of overall venture capital funding last year, which was actually an increase from 4 percent in 2004. Women get just 4.4 percent of the money from small business loans. And when a startup wants to go public to raise money that way, it’s unlikely to be a woman-led one: just 3 percent of those that went public between 1996 and 2013 had female CEOs.

What may be standing in women’s way is not their own abilities, but stereotypes and discrimination on the other side of the table. Even when presented with the same exact pitch, investors prefer to give their money to men. Business school students reviewing prospectuses from the same company were four times more likely to recommend investing in it if it was led by a man.

Tags:

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.