NEW RESEARCH | Crowdfunding levels the playing field for entrepreneurial women

Unlike traditional financing, women are not disadvantaged when seeking capital through crowdfunding. This can bring more green innovations to the market.

It is well documented in research that women face greater obstacles than men when seeking capital for their businesses. Banks, venture capital firms and business angels tend to hold women entrepreneurs to a higher standard, question their drive and assess projects as less profitable – even though these assumptions are not supported by evidence.

– There is an internal bias among traditional financiers. Women are not considered to operate in sufficiently profitable industries or have the same willingness to invest in their business. But previous research has shown that this is actually not true when you look at the numbers, says Victoria Eriksson at Luleå University of Technology.

In her doctoral thesis, she has studied how entrepreneurs who run environmental and climate projects succeed with crowdfunding. An important focus has been the gender aspect.

Crowdfunding breaks the pattern

– In general, we don’t see any difference between the ability of men and women to get their projects funded through crowdfunding. And I think that’s very important, given that we see those problems in traditional forms of financing many times.

This means that crowdfunding can level the playing field for entrepreneurs who otherwise risk not having their ideas tested in the market.

Requirements may be higher for women

At the same time, the results show that gender does matter in some situations. Especially when it comes to the kind of legitimacy an entrepreneur can show.

– We see that male funders are more sensitive to whether female project owners have a strong network. In our example, it was about collaboration with the automotive industry. If the woman had such an established collaboration, the willingness to fund her project increased. If there was no strong network, the project was assessed more harshly than the corresponding project run by a man, says Victoria Eriksson.

This means that while women are not generally disadvantaged in crowdfunding, they can still face subtle barriers.

A stepping stone to the next step

Despite these nuances, Victoria Eriksson sees great potential in crowdfunding as an alternative source of financing – not least for entrepreneurs who want to pursue green innovations.

– Crowdfunding can help women turn their ideas into reality, while providing them with proof that the technology or project is actually in demand. It can strengthen the chances of getting capital from traditional funding sources in a next step.

– For society at large, it could mean that more sustainability projects actually become reality.

Contact victoria.eriksson@associated.ltu.se

More about the thesis
Victoria Eriksson will defend her thesis A Penny for the Environment: Perceptions, Signalling and Bias in Crowdfunding on October 17 at Luleå University of Technology.

Read more:
How to reduce crowdfunding uncertainty – 3 tips from the expert
Researcher’s top 5 tips for crowdfunding success
Crowdfunding: these are the people who invest in your idea