Crowdfunding aids women entrepreneurs in closing the funding gap

women entrepreneurs
November 13, 2021
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We all know those female entrepreneurs get less funding than male business owners around the world. This is the reality of even many developing nations, and it comes at a high cost to efforts to achieve gender equality.

Female entrepreneurs are denied equal opportunity to create and build successful businesses that contribute to the global economy. As a result of this financial disparity, they have to fall behind their dreams.

Investors must extract information and make decisions based on a brief interview and pitching process to assess the chances of success, particularly in the early phases of a start-up.

As a result, they rely primarily on their intuition and the impression they produced throughout the brief interview. This gives an opportunity for biases to enter the decision-making process.

Funding is required at various stages of a business’s development to meet investment requirements. Discrepancies in finance impact the ability to succeed and grow in the future. Funding gives an edge over your competition, especially in the industry.

Unfortunately, investors favor the male-led start-ups even when both women and men presented and offered similar content.

Addressing the financial gap should be viewed as a moral obligation, a vast untapped opportunity for investors, and a possible economic boost. We should make every attempt to remove any existing bias.

How crowdfunding helps close the funding gap

As a first step, a clearer understanding of the financial gap must be established and the shortcomings and opportunity costs involved. It’s tempting to advise women to avoid all loans and credit and instead rely on crowdfunding to meet their financial requirements. While crowdfunding offers its own set of advantages, the amount of money raised is often insignificant compared to traditional loans and investments.

When securing financing, we need to understand the diversity and awareness of our biases. We must increase the variety of lenders and investors and their understanding of how their biases are harming women entrepreneurs and our economy and society as a whole.

Obtaining the right source of finance is one of the biggest challenges women entrepreneurs face. Currently, a wide variety of funding options are available. But to decrease the funding gap, one out-of-the-box funding solution that has emerged in recent years is the phenomenon of crowdfunding. For centuries, family and friends have been one of the most common sources of venture capital sources. Crowdfunding is the modified version of this venture capital offered through a more extensive online family network. In other words, it is very much dependent on the social media platform.

These days, more women are turning to crowdfunding. Because crowdfunding backers are made up of a more representative cross-section of society—including, of course, women—it levels the playing field. While investors and lenders represent a narrow slice of the population (mostly white men), crowdfunding backers comprise a more representative cross-section of society—including, of course, women.

How social media platforms are helping to close the funding gap

Women entrepreneurs can now establish networks of friends, colleagues, and like-minded people more efficiently and effectively than ever before, courtesy of social media. Through crowdfunding websites, women entrepreneurs or project leaders can even leverage their networks to gain the required funding. This is used to support the endeavors of other people or organizations. This occurs for various purposes, such as citizen journalism, disaster management, political campaigns, creating free software, funding a small business or a start-up company.

The women entrepreneurs post funding requests on a crowdfunding website with a detailed description of the project. According to the terms and conditions of a particular crowdfunding website, funding may be provided to the entrepreneur as a loan or a donation. Once the funding request is posted, the entrepreneurs can use their networks to spread the project to potential donors through word of mouth, email, Facebook, Twitter, and other social media platforms.

Though crowdfunding is a comparatively new idea, its basis can be found in cooperatives around the world. However, the internet has remodeled and streamlined it to quickly imitate the cooperatives’ model for low-level or sudden needs. This program is very much related to online communities and social networks. The crowd may already exist as a community and can also be increased with like-minded people joining the fray. But since the internet disseminates information at lightning speed, a crowdfunding network can assemble or disassemble at any time.

However, to find the funding you need, your project must get noticed by others. To catch the attention of the potential funders, you need to stand out among others, engage your network, and get the funds. Here we list some tips you can follow to secure the desired funding for your project.

How to close the funding gap

One area to begin is to ensure that the Consumer Financial Protection Bureau moves forward with its request for data on small-business borrowers from small-business lenders.

  • Media coverage is critical for showcasing successful business ventures, especially when female entrepreneurs can inspire other women to start their businesses and help them believe in their abilities. They are also helping to dispel the stereotype that entrepreneurship is a male-dominated activity.
  • We can all reflect on how our conscious and unconscious bias manifests itself. We can help correct the wrongs and better support women on their entrepreneurial journeys by acknowledging our shortcomings.
  • It is highly important to create an indelible first impression. You should not lose out on building up the image of your project. Since you get only one chance to make a first impression, you must put in your best effort. This is particularly important since there may be another 30 projects simultaneously trying to make a first impression. Create a catchy name, description, and image so that your project stands out among other projects.
  • Another strategy is to urge investment boards and programs, such as Small Business Investment Companies (SBICs) or private lenders, to be more diverse and transparent. Small-business owners and women’s advocacy groups should issue scorecards to lenders who approve or decline loan applications from women entrepreneurs.

It will take years to make the types of changes required to transform traditional funding.

Meanwhile, it’s critical to think about the impact crowdfunding platforms can have on business growth.

Women can seek more money for their initiatives than they do currently, increasing their access to funding and helping their businesses develop even faster.

Lenders and investors who witness this accomplishment will, hopefully, reconsider their strategies in the future. There should be more effort to reform how we support women-owned businesses and bridge the funding gap for good.

 

About the Author: Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California. He has contributed to publications such as Entrepreneur, All Business, US Chamber, Finance Magnates, Next Avenue, and many more.

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