The Wall Street Journal has posted a very insightful article showing that women are having success funding their projects through crowdfunding sources such as Kickstarter and Indiegogo. Women account for less than 8% of chief executives at venture-backed firms, occupy just 17% of board seats at Fortune 500 companies and own a mere 30% of all companies.
But early data suggest that they are outperforming men in another arena: raising money online via crowdfunding.
When Cheryl Kellond, 43 years old, launched a Kickstarter Inc. campaign to make women’s sports watches, she targeted women’s running and triathlon clubs and women who blog about fitness and running. She raised $408,000 in 2012 for Bia Sport Inc., which shipped its first 3,000 multi-sport GPS watches this spring. Most Kickstarter backers were female athletes, Ms. Kellond says, but the venture also attracted women “who wanted to support women doing something different.”
On Kickstarter, where backers make contributions in exchange for rewards, women-led companies account for less than 10% of technology projects. But roughly two-thirds of women-led technology ventures reached their fundraising goals versus just 30% of technology ventures with male founders, according to a new academic study.
Overall, women are 13% more likely than men to meet their Kickstarter goals, even after controlling for project type, amount being raised and other factors, according to the analysis, which examined 1,250 projects in five categories that sought at least $5,000 between 2010 and 2012.
How female entrepreneurs fare on crowdfunding sites, such as Kickstarter, is notable because women tend to launch businesses with less financing than men and have more difficulty raising funding, making it tougher for their firms to grow. Overall, men start companies with nearly twice as much capital as women, according to a recent study by Alicia Robb, a senior fellow at the Ewing Marion Kauffman Foundation, an advocacy group for entrepreneurship. Just one-in-eight companies that raised venture financing in the first half of 2014 has a female founder or co-founder, according to Dow Jones VentureSource; 7.6% have a female CEO.
The funding gap has been “stubbornly persistent,” says Ethan Mollick, an assistant professor at the University of Pennsylvania’s Wharton School of Business who co-wrote the Kickstarter analysis with Jason Greenberg of New York University. But on Kickstarter, women outperform men in areas where they are underrepresented, such as gaming and technology, he says, because they attract support from “women who are activists who want to reach out and help other women.”
Crowdfunding proponents say their sites democratize access to capital. Women are 61% more likely than men to meet their financial targets on its site, Indiegogo Inc. says, and account for 41% of small business, technology and other entrepreneurial campaigns that meet their funding goals.
Joanna Griffiths, founder of Knix Wear Inc., a high-tech women’s underwear line, raised a total of $100,000 in two Indiegogo campaigns in 2013 and 2014, mostly from women. She says her first campaign drew a letter of support from Bonnie Brooks, then president of Hudson’s Bay Co. and now the vice chairman of the Toronto-based department-store company, which currently carries Knix Wear in 18 of its stores. “It’s a female product. It’s a female team,” says Ms. Griffiths, 30, who expects sales to hit $1 million this year. “There’s very much a connection there.”
Crowdfunding isn’t comparable to venture-capital financing or bank lending, partly because backers receive a T-shirt or other reward, not a company stake or loan payment. Successful technology campaigns raise $90,000 on average, Kickstarter says, while venture-backed U.S. companies typically secure $600,000 to $3 million in their earliest funding round, according to Dow Jones VentureSource.
Still, crowdfunding can provide entrepreneurs with needed financing, marketing and early indications of customer demand. Ninety-percent of successful Kickstarter projects in design, technology and videogames remained ongoing ventures at least 18 months later, Prof. Mollick says; nearly one-third reported annual revenue of at least $100,000.
“Crowdfunding is an accelerant,” says Cynthia Breazeal, a Massachusetts Institute of Technology professor and founder of Jibo Inc., a venture-backed maker of social robots that has so far raised more than $1.6 million in its Indiegogo campaign.
Julie Uhrman, founder of Ouya Inc., raised nearly $1 million in early-stage financing to make an open-platform TV game console built on Android, but had trouble securing additional venture funding. That changed after she raised nearly $8.6 million from more than 63,000 backers in 2012, the second-most successful campaign that has been completed since Kickstarter was founded in April 2009. Watchmaker Pebble Technology Corp., the top fundraiser, secured nearly $10.3 million in 2012. Kickstarter “proved demand,” says Ms. Uhrman, 40, who last year raised $15 million from Kleiner Perkins Caufield & Byers and other venture investors and now has 28 employees.
Women account for about 44% of Kickstarter backers, says Ms. Robb, who co-authored another analysis of Kickstarter data. Her study analyzed nearly 14,000 projects between April 2009 and March 2012. She found that 40% of the projects funded by female backers were led by women, compared with 23% of projects backed by men. Women tend to seek less money than men, which could also contribute to their success, adds Ms. Robb, but are more successful even when they ask for similar amounts of funding.
There are signs that women’s crowdfunding successes could be mirrored on online investing platforms. Women run nearly two-thirds of companies that have successfully raised funds on CircleUp, an online platform connecting consumer and retail startups with wealthy individuals known as accredited investors. Women-led startups have a 70% success rate versus 58% for men, CircleUp says, and receive more page views and more investors, even though there is no difference in revenue size, profitability and other measures of quality.
“It’s a meritocracy,” says CircleUp CEO Ryan Caldbeck. Female founders “might be doing a better job communicating their roadmap.”
Original WSJ article: Kickstarter Closes the “Funding Gap” For Women