Crowdfunding: A Viable Source of Capital for Women Entrepreneurs

Historically, access to capital is a greater challenge for woman and minority owned businesses than it is for businesses owned by non-minorities and/or males. Woman and minority business owners, for example, are less likely to qualify for traditional financing, and when they do, they receive smaller loans at higher interest rates. These challenges are particularly stark for female entreprenuers. According to a recent study by fundera, “Women entrepreneurs get offered smaller loans across every product, from the same groups of online lenders, with no exception, and pay significantly higher interest rates than men do.”  This disparity applies even to SBA loans. According to the study, SBA loans for women are on average two-and-a-half times smaller than those for men ($59,857 and $156,279 respectively.)

One area where women appear not to be at a disadvantage, however, is crowdfunding. According to two recent reports from the National Women’s Business Council, social networking rather than gender is the strongest predictor of crowdfunding success.

Key Crowdfunding Takeaways

The NWBC used data from two crowdfunding platforms, Kiva and Kickstarter, to analyze the factors that influence the sucess of crowdfunding campaigns. Although the two platforms are based on different models — Kiva is a nonprofit online lending platform while donations on Kickstarter are promised in exchange for a “reward” (for example, a copy of a finished work or a discount on future products) — the key takeaways from the analyses were essentially the same. Most importantly, social networks (at which women tend to excel) were found to be more important than professional networks in predicting a campaign’s success. Additionally, the quality of the social network (closeness of the connections) was as important as the quantity (e.g. the number of Facebook or Twitter followers). Leveraging connections successfully was another important component of success.

Other factors that influence a crowdfunding campaign’s success included starting strong and setting appropriate funding goals. On both Kickstarter and Kiva, for instance, crowdfunding efforts were most successful during the first 30 days of a campaign and fell off dramatically after that time. Additionally, entrepreneurs with smaller social networks did better if they set a conservative funding goal. (The NWBC suggests about $6,000.)

The Impact of Social Media

Yet another factor that has a significant effect on crowdfunding efforts is social media. On Kickstarter, campaign creators with fewer than 400 Facebook followers met their campaign goals 5 percent less often than those with 400 to 800 followers. And those with between 800 and 1,600 followers bested those results by an additional 6 percent.

That said, the number of Facebook followers had less of an impact on a crowdfunding campaign’s success than the number of times the campaign was shared. What’s more, the researchers found that the number of shares did not correlate closely with the number of followers, which points to how important leveraging one’s existing network is to success.  (Learn about how to develop this important skill here.)

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At The Carmoon Group, we work hard to help our clients succeed. Whether you need access to capital, a suite of business insurance products or a comprehensive risk management plan, our professional staff is here to help every step of the way. Just call us today to set up an appointment for your business review. Or, if you prefer, reach out online and we’ll get back to you at a convenient time.

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