For every nine men raising equity financing to start and scale their businesses, only one woman does, according to Access to Capital by High-Growth Women-Owned Businesses, a report by the National Women’s Business Council. That stinks!

Fundraising for your company is hard, even for men, but, women face greater challenges.

  • Overt sexual harassment. Ripped from last year’s headlines were stories in Forbes and Wired of male investors luring women to meet under the pretense of being able to pitch their companies only to receive unwarranted sexual advances. One of the most sensational stories was Whitney Wolfe who, in a sexual harassment and discrimination suit against Tinder, a dating app, accused her boss of repeatedly calling her a whore and stripping her of her cofounder title because she is female. The suit was settled out of court. While most men are not like this, far too many still are.
  • Unintended bias that is a result of pattern recognition. Like it or not, the reality is that people are more likely to invest in people who are like them. It’s called homophily, said Alicia Robb, senior fellow at the Kauffman Foundation, which advocates for and researches entrepreneurship. People of the same gender, race, and/or ethnic group tend to associate and bond with each other. Gender is the strongest bond. Julia Pimsleur, of Little Pim, a language program for children, felt most of the VCs she pitched – almost all men – didn’t “get” her product that is mainly bought by women. Pimsleur did raise money from Golden Seeds, one of the most active early-stage investment firms that focuses on women-led companies.
  • Not a women friendly environment. Business plan competitions and pitch forums are frequently about bravado and making ridiculous projections. Men excel at this. Women tend to be more conservative. This is the #1 complaint I get from the hundreds of women entrepreneurs I’ve interviewed, said Vivek Wadhwa, academic, researcher, entrepreneur, and a vocal critic of the underfunding of women-led companies by Silicon Valley (and a man). “When they [women] go to angel forums and the like, they feel intimidated and left out.”

Opportunity knocks, but women entrepreneurs are slow to answer

Title II of the JOBS Act created a new funding source with the potential to level the playing field for women entrepreneurs: equity financing for companies that are publicly raising money. “Crowdfunding will enable qualified entrepreneurs, both men and women — and particularly women — to raise capital from their community of historic relationships (i.e., people who know, respect and trust them) in a more efficient and transparent manner than previously available,” said Douglas Ellenoff, partner, Ellenoff Grossman & Schole, a leading securities and crowdfunding law firm.

“Raising money is extremely competitive and companies need to explore every angle possible,” said Paige Cattano, Wonder Technologies, who successfully raised money through equity crowdfunding. “Crowdfunding provides the opportunity to tell your story to a broader audience than traditional VC firms.”

Crowdfunding gives vendors, colleagues, friends, and family a way to be your sales force. “Crowdfunding is the most powerful marketing machine in our world today,” wrote Patty Lennon in her book, THE CROWDFUNDING BOOK: A How-to Book for Entrepreneurs, Writers, and Inventors. “It creates social proof, raises capital, creates customer engagement, generates market research, and integrates the value of your social connections to what you are creating in a direct and tangible way.”

Yet, one year after Title II was approved, it’s falling short of its promise. Only 17% of companies that raise money through crowdfunding have women on the founding team, according to Crowdnetic, which maintains an equity crowdfunding database.

Ensuring women seize the moment.

When obstacles confront us, we have a choice: overcome them or let them overcome us. I’ve never been one to be overcome by obstacles. I’ve been part of the women’s entrepreneurship scene since the late ‘90s. I was on the board of the New York City chapter of the National Association of Women Business Owners for eight years. I co-founded an educational conference company in the early 2000’s to help women pass the $1 million mark in revenue, which women achieve at one third the rate of men, according to the State of Women-Owned Businesses Report. For the past three years, I’ve written about the success factors of women entrepreneurs in Forbes and wrote Forget the Glass Ceiling: Build Your Business Without One.  

Education is key to women’s use of equity crowdfunding whether as entrepreneurs or investors. Ventureneer, my company, is now embarked on a project to provide actionable tools, insight and training with real life examples: a road map to overcome the obstacles women face in raising funds.

It pays to play.

Women are already proving that they have the social capital that converts to real capital via another form of crowdfunding, rewards based, which has been around for six years. Instead of getting shares in a company for your money, you receive a tangible item or service. Women made up about 35% of the project leaders and 44% of the funders on Kickstarter in research conducted by Hebrew University, Kauffman Foundation and UC Berkeley. Women had a 70% success rate in getting funded vs. 61% for men, with further analysis showing that it was not the women’s more modest financial goals that accounted for their higher rate of success.

Women are consumers, why not investors?

Women make more than 80% of consumer purchasing decisions. They have the ability to identify winning products based on their own needs. Male angels and venture don’t get this opportunity. “VCs are woefully under-informed about how the female consumer works, thinks, and behaves,” said Joyce Kim, Freestyle Capital said at the Launch Festival last year.

Women have decision-making power over $11.2 trillion or 39% of all investable assets in the U.S., according to Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth, a report by the Center of Talent and Innovation. Women dominate college graduates and purchase decisions, why not investments, Chance Barnett, — CEO Crowdfunder, angel investor and catalyst in equity crowdfunding legislations and the JOBS Act — wrote in Forbes. To that, I’d add that women also dominate the internet and social media, which are critical to mounting an effective crowdfunding campaign.

Publicly raising equity funding can be a game-changer – but only if we join together to take advantage of it.

 

This article was written by Geri Stengel from Forbes and was legally licensed through the NewsCred publisher network.

To learn more about the incentives and programs available to women entrepreneurs, read this article from the Business Owner’s Playbook.