CNBC | Momentive Small Business Survey

Closing the gender gap: Women founders win on crowdfunding platforms

Lexie Carmon, special to
Sean Gallup | Getty Images

Women entrepreneurs have a harder time raising money than men. The gender gap extends to bank lending, and in Silicon Valley men have the power and the purse strings.

As a result, more female founders are taking funding matters into their own hands. Women founders who use seed crowdfunding platforms aren't just reaching their funding goals, they are doing so at a rate that's better than crowdfunded ventures started by men. Across 450,000 seed crowdfunding campaigns recently studied by PwC and The Crowdfunding Centre, women-led campaigns reached their funding goal more often than male-led campaigns.

In the United States and U.K. — the largest markets for seed crowdfunding campaigns — 20 percent of male-led campaigns met their goal compared with 24 percent and 26 percent of female-led campaigns, respectively. Across nine of the largest global crowdfunding platforms, female-led campaigns were 32 percent more successful at reaching their funding target than male-led campaigns.

Crowdfunding connects founders of new ventures with financial backers to launch or develop a new business, product or service. Seed crowdfunding increased from $10 million in 2009 to more than $767 million in 2016, with backers from over 200 countries.

Even in the technology sector, where there are nine male-led campaigns to every one female-led campaign, female-led campaigns are more successful — 13 percent to 10 percent, respectively, the study found. The two highest-funded female campaigns were in the technology and the design sectors, while the two most popular — ranked by the largest number of individual backers — were in the technology and the food sectors.

Top 3 sectors for female-led campaign success

  1. Entertainment & media: 30 percent
  2. Retail & consumer goods: 22 percent
  3. Hospitality & leisure: 21 percent

"It's obvious that women are discriminated against in many different areas, including funding. What I love about crowdfunding is it democratizes access to capital and, more importantly, the playing field," said Sherwood Neiss, principal at Crowdfund Capital Advisors.

Women owners represented about 40 percent of the 2,030 small businesses surveyed in the recent CNBC/SurveyMonkey Small Business Survey. The survey of 2,030 business nationwide found that women are more likely to run the smallest firms. It revealed that 70 percent of women business owners have firms employing four people or less; for men it's 56 percent. Only 14 percent of women-owned businesses have 10 or more employees; for men it's 26 percent.

The success of female founders doesn't mean they are more likely to seek out crowdfunding as a source of business capital. Research shows that men tend to use crowdfunding more often than women.

More from the CNBC/SurveyMonkey Small Business Survey:
Getting a college degree? A majority of business owners don't have one
How to crush your business rivals on Facebook
Almost half of small businesses still lack a website

"There's a general lack of awareness to this new form of capital raising," Neiss said. "Women don't know. Men don't know. But men know it more than women."

Women business owners surveyed by CNBC and SurveyMonkey were less likely to say technology innovations would have a positive effect on their business — 36 percent vs. 45 percent of male business owners. But female business owners are slightly more likely to use social media for customer communication and advertising.

Men also raise a lot more money than women, even if their success rate is lower. Just under 90 percent of crowdfunded campaigns raising more than $1 million were male-led campaigns.

Aoife Flood, senior manager of the global diversity and inclusion program at PwC, said the dearth of women in the traditional financing world is a difficult hurdle to overcome — men lend more to other men.

The fact you don't have predominantly men making the funding decisions means that the affinity bias that appears so rife in traditional funding channels is mitigated. This is what gets the ball rolling for female crowdfunders.
Aoife Flood
senior manager of the global diversity and inclusion program at PwC

Flood pointed to recent research showing that most decision-makers in the venture capital industry are male. Just 7 percent of partners at the top 100 venture firms globally are women. Among 2,300 venture and microventure firms, only 8 percent of partners are female.

"Each of us is programmed with blind spots, and whether conscious or unconscious, we are drawn to people like us or who remind us of ourselves," Flood said.

Top 5 countries for female-led campaigns

  1. United States: 35,264
  2. U.K.: 6,013
  3. Canada: 3,109
  4. Australia: 999
  5. Germany: 679

Research indicates that VCs with only male partners are more likely to invest in male-led projects or business and that male entrepreneurs are 86 percent more likely to be venture capital-funded than their female counterparts.

According to American Express data, women have increased business ownership by 45 percent in the past decade, a far faster rate than overall new business growth in the United States. Yet only 1 in every 4 loan applicants is a woman, and they ask for less than men do in loan amounts, are approved at a lower rate, and pay more in interest, according to online small-business lender Fundera. Online business credit marketplace Biz2Credit found a similar trend: 29 percent of the registrations on its platform came from female entrepreneurs.

Women-led businesses surveyed by CNBC/SurveyMonkey indicated they are less bullish on business growth in the next year and less likely to increase full-time staff. They also are less likely to use a business credit card or loan/financing to fund marketing, product, technology or other business initiatives. The survey also found that women are more likely to use rewards points as a source of financing.

"It has been common currency until now that women are less interested in business or even less able," said Barry James, co-founder and CEO of The Crowdfunding Centre. "These have been advanced as explanations as to why rates of funding [for women] in the older entrepreneurial economy have been so low. It's only now that we have the data to give the lie to this."

"The crowd is much more gender-balanced," Flood said. She added: "The fact you don't have predominantly men making the funding decisions means that the affinity bias that appears so rife in traditional funding channels is mitigated. This is what gets the ball rolling for female crowdfunders and fuels many of the factors that lead to their seed crowdfunding success."

The crowd may also be more receptive to the way women pitch:

"Women tend to be much more relationship-focused. Female crowdfunders use more emotive and inclusive language in their campaign pitches and videos ... This is more likely to resonate with the crowd," Flood said.

Male-led campaigns use more technical business language, and research has shown that is negatively correlated with backer funding.

"The biggest challenge for any campaign is clear communication, getting across to the potential backer, not just the proposition but also the vision behind it — the 'why' as well as the 'what,'" Flood said. "This is very different than just providing the information or describing the proposition as you see it, and takes a surprising degree of skill and mental agility. Empathy is key, and I can say this as someone with a long history in tech, we 'geeks' are not best known for our social skills — especially male geeks."

According to the CNBC/SurveyMonkey data, women-owned businesses are slightly more likely to generate a majority of revenue from individual consumers — 74 percent vs. 68 percent for men.

Flood said the wide lead for men in the overall number of campaigns and dollars raised points to the tech-industry roots of crowdfunding. "It's a financial tech innovation, and like the technology sector more broadly, this is an area dominated by men. Female entrepreneurs are also less networked or engaged in the world of funding because it too is male-dominated. There is a lack of awareness that is limiting female representation in crowdfunding," the PwC executive said.

It's a new starting point

The seed crowdfunding studied by PwC and The Crowdfunding Centre is distinct from all "rewards" crowdfunding campaigns, which can also include donation campaigns, albeit with a large overlap. But the distinction is a very important one when trying to understand crowdfunding as a source of seed capital, and its very different gender profile in accessing business capital, James said.

"What we are doing is showing that when the basis of decision-making is changed from investors making investment decisions to a market directly backing innovations without participants incurring significant individual risk, the gender profile makes an unexpected hyper-jump from women being consistently far far behind, to women consistently well ahead."

James added that while crowdfunding campaigns usually represent businesses at a very early stage, he views ventures and established firms on a continuum based on current size and growth potential. "Seed crowdfunding is a new starting point for all, including those with plenty of the latter, but is much better at accommodating and supporting those lower down that scale that could still be viable, in the short or longer term, creating significant numbers of jobs and growth via a large number of smaller firms."

By Lexie Carmon, special to