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Crowdfunded women better at reaching funding goals

Woman looking at the stock in front of computer.
Published Feb 02, 2021

Backed up by women, female entrepreneurs at crowdfunding platforms reach their funding goals more often than men. Hadar Gafni at the Department of Industrial Economics and Management has mapped the gender patterns at crowdfunding platform Kickstarter.

Sweden might be among the most gender equal countries in the world - but not when it comes to entrepreneurship. The difficulty of finding financial support keeps holding women back, something that is a well-known fact. Around 93 percent* of the yearly investment capital are invested in companies founded by men and 1 percent in companies founded by women (6 percent in mixed teams). Men are, quite frankly, more likely to support other men.

For women, crowdfunding - raising capital among the grassroots - can be a way to get pass the male gate keepers. Kickstarter is today one of the most well-known crowdfunding platforms, and about one third of all projects launched since the start in 2009 have been created by women. This equals about 170 thousand projects.

A recent study from the Department of Industrial Economics and Management at KTH shows that when getting the chance, women do well when raising money through Kickstarter.

Portrait of Hadar Gafni
Hadar Gafni, postdoctoral researcher

“These women are actually more likely than men to reach their funding goals”, says researcher Hadar Gafni, one of the researchers behind the study, who is intrigued by the dynamics of crowdfunding.

Crowdfunding more gender equal

The simple reason seems to be the support from female backers. In crowdfunding, as opposed to business angels, venture capital funds, and banks, the gender balance is more equal among the backers on Kickstarter. That brings an advantage for women who want to raise money for their ventures.

If someone would suggest women set lower goals, that is proven wrong by the KTH researchers.

“The literature suggests that women are more likely to be less confident, more risk averse, etc, so we hypothesized that women on Kickstarter would set lower fundraising goals then men do. However, we don’t find a significant difference between the genders, possibly because entrepreneurial women on the platform have characteristics that make them different from other women, and they are more confident and risk tolerant – characteristics normally associated by men.”

The gender patterns from traditional ways of financing startups are the same within crowdfunding, according to the study. Male funders prefer to support male entrepreneurs and women support women - to a certain extent. When looking at funders who contributed to at least five projects, “serial backers” as Hadar calls them, women become quite indifferent to gender, while men persist in contributing to men.

“Beyond the shared interests, I believe that some men are driven by either taste-based discrimination – sexism, in this case – and, or believing that male entrepreneurs will produce better outcomes, because women are less associated with entrepreneurship. This does not mean that every male backer is sexist of course, but it rather shows that sexism takes parts in men’s decision-making when funding, as a whole.”

Prejudices to fight against

There are a lot of prejudices to fight when it comes to entrepreneurship. A survey from 2019 shows that Nordic companies with one or more women as founders are more profitable and have a turnover of 45 percent more. According to Hadar Gafni, crowdfunding has been increasingly important during the current economic recession.

“When small businesses are struggling, and banks and investors refuse to even meet them, one option to raise the money they need to survive is through crowdfunding”, Hadar says.

”I hope the results of our study will reach aspiring female entrepreneurs, and encourage them to pledge the funds they need via crowdfunding. There might a table where the cards are not stacked against them.”

Facts about crowdfunding

What is crowdfunding? 

A method of raising capital through the collective effort of friends, family, customers, and individual investors.

Different types of crowdfunding:

Donation-based – Contributors receive no financial return for their donation.

Rewards-based – Contributors receive some “reward”, typically a product or service that company offers.

Lending-based – Lenders are expected to receive their money back, with or without an interest (depending on the platform).

Equity-based – Funders become part-owners of the company by trading capital for equity shares.

Kickstarter, Crowdcube, Fundedbyme, and GoFundMe are examples of platforms collecting funding for different projects.

Categories and gender

At Kickstarter, most of the contributions by women went to projects in the category of Film & Video, Music, and Publishing. These categories were popular also among men, alongside Technology and Games (2009-2012).

Facts about the study

Gender Dynamics in crowdfunding: Evidence on entrepreneurs, backers and taste-based discrimination. Authors: Hadar Gafni, Dan Marom, Alicia Robb, Orly Sade

*Survey from 2019 by Unconventional Ventures, Tillväxtverket in Sweden and Norsk Venturekapitalforening.

Text: Anna Gullers

Belongs to: Industrial Economics and Management
Last changed: Feb 02, 2021