An analysis of more than 450,000 seed crowdfunding campaigns across the globe showed women-led campaigns reached their funding target more often than male-led campaigns. In fact, campaigns led by women across the world in 2015 and 2016 were 32 percent more successful than those led by men across a wide range of sectors, geography and cultures. Furthermore, many female-led projects achieve a greater average pledge amount than male-led projects: On average, each individual backer contributes $87 to women and $83 to men.

It is a sharp contrast to established funding mechanisms for business startups and growth, in that women-led businesses continue to face endemic barriers to accessing finance. Given the growth and global reach of seed crowdfunding, this presents several major opportunities, each with the potential for major social and economic impact.

First is the understanding and acceptance that seed crowdfunding is now a well-established environment through which women can thrive, unrestricted by any embedded bias.

Second, these findings pose a strong challenge to existing entrepreneurial and business norms by seriously questioning whether deep-rooted barriers are preventing greater access to funding by female entrepreneurs.

Women entrepreneurs are suffering because of these barriers, and tackling them can have a major impact, including substantial potential gains to economies. It is a matter of good business and good practice that those making such decisions within business more generally, as well as angels, venture capitalists and other funders, assess and address such barriers. By doing so, women entrepreneurs will be better supported, and all will benefit.

Crowdfunding is an umbrella term, encompassing four main types:

• Seed crowdfunding is the use of rewards-based crowdfunding platforms to fund the creation, launch or development of new businesses, products and services, where backers pay upfront for a product, service or project.
• Equity crowdfunding enables investors of all sizes to purchase small parcels of equity within growing businesses, usually in small amounts from disposable income. This gets a lot of press attention but makes up only a small percentage of overall crowdfunding.
• Crowdlending, also known as peer-to-peer lending, enables individuals or businesses to borrow from the pooled resources of individuals who wish to direct the use of their funds — sometimes in search of a greater return on their capital than bank deposits or bonds can provide.
• Donations-based crowdfunding is used to help make community initiatives a reality, with the backing of their supporters or community of interest.

The data analysis for this report focused on seed crowdfunding, which accounts for about 19 times as many campaigns as equity crowdfunding; it is the largest sector of the four by volume of campaigns.

Seed crowdfunding was founded to help individuals start in business, and it has spread across the globe since the 2008 launch of Indiegogo, the first international crowdfunding website. Money raised through seed crowdfunding catapulted from about $10 million globally in 2009 to more than $767 million in 2016, counting only nine of the biggest global platforms.

Since 2014, The Crowdfunding Center has analyzed data from more than 465,000 crowdfunding campaigns, and this article analyzes the results of two full years of seed crowdfunding campaign data (2015–2016) across 205 countries and from nine of the largest crowdfunding platforms.

The data clearly shows more men than women use seed crowdfunding, yet globally, women are more successful at crowdfunding than men. To wit, 22 percent of campaigns led by women reached their target, compared with 17 percent of those led by men. This is not a collective anomaly; women-led campaigns performed better in terms of securing their funding goals than campaigns led by men, when data is segregated for every sector and territory.

Even in what are considered more masculine sectors, such as technology, where we see nine male-led seed crowdfunders for technology ventures to every one female-led crowdfunder, 13 percent of women were successful in achieving their funding goal compared with 10 percent of men.

In the United Kingdom and United States, which boast the largest volumes of seed crowdfunding, 20 percent of male-led campaigns reached their targets, while female-led campaigns outperformed, with 24 percent of women in the United States and 26 percent of women in the United Kingdom successfully reaching their campaign funding targets.

This trend continues in territories where seed crowdfunding is not yet as wide-scale or as successful. In Africa, for example, 11 percent of female-led campaigns were successful compared with 3 percent of male, and in E7 countries — China, India, Brazil, Mexico, Russia, Indonesia and Turkey — 10 percent of female-led campaigns achieved their funding targets, compared with 4 percent of male-led campaigns.

One of the most important benefits is market validation. Entrepreneurs who take the traditional route to financing their business only achieve market validation at a much later stage, often after the investment has been spent.

Seed crowdfunding has a positive impact on the cash flow of startups and growing businesses, too. Launching a crowdfunding campaign gives an entrepreneur the ability to presell a product. With an order book filled by angel investors, banks and venture capitalists can see proof of concept.

THE MARKET DECIDES

Consider seed crowdfunding as a massive control group set against traditional routes to fund small-business startup and growth. One key difference is, in the traditional arena, a “grey-suit factor” has substantial influence on decision-making. That is, men in suits are predominately making the decisions, and this has an impact on who receives funding.

Research from across the world indicates this has a dramatic impact on female entrepreneurs’ ability to access finance. But in crowdfunding, decisions are made directly by the market. This analysis demonstrates the power of the crowd — which is typically made up of roughly equal numbers of female and male project backers — in eradicating bias.

Beyond the United State, United Kingdom and Australia, financial exclusion remains a major constraint for women, particularly in developing countries. Worldwide, a $300 billion gap in financing exists for formal, women-owned small businesses, and more than 70 percent of women-owned small and medium enterprises have inadequate or no access to financial services.

THE MISSED OPPORTUNITY

Investing in or supporting women-led businesses has the potential to deliver some of the highest-returns for investors and societies. Firms that invest in women-led companies generate higher returns on their investments, and the potential exists for £23 billion ($TK) gross value added to the U.K. economy if the United Kingdom can achieve the same level of female entrepreneurship as the United States. Similarly, supporting women-owned startups can boost economic growth in emerging markets and raise women’s participation in the labor force.

A number of initiatives have been developed to expand access to equity, lending and other sources of finance for women-led businesses; many though are limited by supply of capital. Yet, one of the game-changing effects of crowdfunding is how it balances demand with supply. Not only does crowdfunding provide opportunities to entrepreneurs, but also it allows ordinary buyers of products and services to collectively become “mini-VCs.”

The main factor seems to be crowdfunding attracts, enables and empowers far more female decision makers. In essence, just like the dominance of male representation in traditional financing channels can create barriers for women, the more gender-level playing field of the crowd provides one explanation for why women are more likely to succeed at crowdfunding than men. The crowd also presents a greater male reach, and male investors with a greater openness to gender equality are shown to be more likely to invest in female-led projects.

Female crowdfunders also tend to use more emotional and inclusive language in their videos and pitch descriptions than men. This language is more appealing to all potential backers and positively correlated with fundraising success. The use of business language, a style more predominately favored by male crowdfunders in their pitches, has been shown to be negatively correlated with money raised, irrespective of the product or service being pitched.

On average, men tend to seek higher amounts capital for their projects than women, but women’s more modest financial goals are not correlated with their higher rate of success. This data also shows that while women more often set lower financial targets, female-led projects achieve a greater average pledge amount than male-led projects. On average, each individual backer contributes $87 to women compared with $83 to men. This global trend is, however, greatly influenced by U.K. and U.S. data, where crowdfunding activity is by far most significant, with women on average obtaining close to $10 more per pledge than their male counterparts in both markets.

Women-led projects also achieve higher pledge amounts for crowdfunding ventures in the education, entertainment and media, hospitality and leisure, and technology sectors. On the flipside, men raise substantially more in the enterprise and retail and consumer goods sectors, and in Australia, Asia and Italy.

CROWDFUNDED BUSINESS SUCCESS RATE

This data strongly indicates women are more successful at crowdfunding than men; but exactly how positive is this finding for the future of female entrepreneurship? Are crowdfunded businesses sustainable?

Trends suggest crowdfunding has certainly moved in this direction. In 2015, the failure rate of equity-crowdfunded seed-stage companies in the United Kingdom was lower than for non-crowdfunded startups. A survey of 500,000 project backers and project outcomes shows crowdfunding failure rates on Kickstarter are only 9 percent. This figure compares favorably with rates of failure in traditional startups.

ROOM FOR GREATER PROGRESS

Significant opportunity remains for women to become more active and represented in crowdfunding, and to be more ambitious when establishing their fundraising goals. What the data clearly shows is, when women choose to access crowdfunding, they are more than capable.

Before crowdfunding, female entrepreneurs were vastly underrated, undersupported, under-recognized, and a hugely neglected asset to society and the economy.

Jon Terry is a member of the global financial services leadership at PwC. This article is an edited version of the report Terry authored on the subject. The full PwC report can be downloaded at this link: https://pwc.to/2sU6QKz