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women give, women money, women charity, women entrepreneur

Key crowdfunding strategies for women entrepreneurs to raise more money

June 1, 2022/0 Comments/in Featured, Investing in your business, Microfunding, Money /by Victoria Arena

Ramy Elitzur, Associate Professor of Financial Analysis at University of Toronto, shares how women-led businesses can use crowdfunding to launch their startups. 

For a new venture to get off the ground, entrepreneurs require resources and support that greatly enhance the likelihood of its success. Unfortunately, there is still a gender gap in entrepreneurship that means women don’t get the same access to those resources.

In fact, while women make up 51 per cent of the global workforce, their representation as entrepreneurs, according to global crowdfunding statistics, is only 39.5 per cent.

To address this gap, entrepreneurship researcher Eliran Solodoha of Ben Gurion University and I conducted a study in which we analyzed 2,275 rewards-based crowdfunding projects to investigate the impact of the presence of women entrepreneurs and the effects of social validation on their fundraising efforts.

Social validation is a psychological phenomenon in which passive people follow or conform to the actions of others within a group. For example, people are more likely to stop at restaurants with many cars parked outside than those with few cars. Extending this idea to crowdfunding, investors are more likely to commit funds to projects with large numbers of backers and shy away from those with few.

Startups are increasingly turning to crowdfunding to raise financing for their companies. In rewards-based crowdfunding, entrepreneurs seek financing from investors in return for a product or service.

women entrepreneur, entrepreneurship

Photo by Keren Levand on Unsplash

Social validation, crowdfunding success

Social validation is powerful and provides insights into the every-day behaviour of people. For example, research shows that because of social validation, people will often pick an incorrect answer on a vision test — even whey though they know it’s wrong — to conform to the others who publicly picked it.

Additional research shows that participants who read a blog post with fake comments supporting a volunteer activity agree to volunteer for more hours than those who read the same blog with fictitious comments rejecting it.

In a similar manner, potential investors may consider a business venture more attractive when they see others reacting favourably to it.

One of the problems facing women entrepreneurs is that that the entrepreneur’s role is stereotypically viewed as masculine. Consequently, women-led firms face more financing barriers compared to those helmed by men. The question we focused on is whether social validation — specifically, the number of crowdfunding supporters — can reduce the gender gap as companies helmed by women try to raise funds.

We conducted our analysis using standard statistical methods as well as machine learning algorithms that provided a clearer picture of the behaviour of crowdfunding investors.

The importance of crowdfunding backers

Our results showed that, as expected, the fact that a company is led by a woman works against it when it comes to raising financing through crowdfunding. However, our results demonstrated that women-helmed companies can overcome this obstacle and obtain crowdfunding support using social validation.

In other words, if they attract supporters, they can obtain even more supporters. The practical implication is that female entrepreneurs should strive to generate initial support, for example, by raising as much financing as possible at first from their own networks.

social media

Photo by Georgia de Lotz on Unsplash

Another form of social validation involves the number of comments on a crowdfunding campaign, which can demonstrate the size and scope of an entrepreneur’s social networks — again a positive sign for potential investors.

Our machine learning algorithms also demonstrated that while social validation helps women entrepreneurs obtain financing, it peaks at a certain level. The results show that social validation will increase the probability of crowdfunding success by 14.5 per cent overall in combination with all other variables that include geographic location, the category the venture is in (health, music or food, for example) and prior entrepreneurial experience.

The lack of resources and support for women entrepreneurs lowers their chances of success, and ultimately leads to the under-representation of companies led by women. As we show in our study, this problem can be partially overcome in crowdfunding initiatives by socially validating female-led ventures.The Conversation

You might be interested: Why more minority founders aren’t backed by venture capital funding


Ramy Elitzur, Associate Professor, Financial Analysis, University of Toronto

This article is republished from The Conversation under a Creative Commons license. Read the original article.

https://latinasinbusiness.us/wp-content/uploads/2022/01/successful-beautiful-asian-business-woman-holding-money-us-dollar-bills-hand-business-concept-e1654096485873.jpg 429 800 Victoria Arena https://latinasinbusiness.us/wp-content/uploads/2020/11/LatinasInBiz_logo-300x91.png Victoria Arena2022-06-01 11:00:222022-06-01 11:15:47Key crowdfunding strategies for women entrepreneurs to raise more money
Jesse Torres and Aaron M. Sanchez Two Men in your Business

Crowdfunding using social media to fund your startup

May 29, 2015/0 Comments/in Featured, Investing in your business, Microfunding, Money /by Jesse Torres

crowdfunding money access to capital

Before crowdfunding became the ubiquitous start-up funding mechanism that it is today, most entrepreneurs were limited to reaching out to their friends and family when it came to raising money for a new venture or to grow an existing business. Thanks to the Internet, social media and the power and influence of the crowd, funding is more accessible to more people than at any time in the history of civilization. Welcome to the age of hyper-democratization of business creation.

SIGN UP TO GET NOTIFIED WHEN Two Men In Your Business Guide to Crowdfunding is released in July 2015!

When we hear the term crowdfunding we think about the Internet sensations that enabled needy but worthwhile causes to raise money in small amounts from numerous sources. These crowdfunding platforms are referred to as innovative, flexible and democratic and are viewed by many as a modern-day miracle made possible only as a result of the Internet and social media.

Today it is not possible to talk about entrepreneurship without talking about crowdfunding. Entrepreneurs have the ability to efficiently tap more financial resources than ever before thanks to crowdfunding platforms like Kickstarter and Indiegogo. By reaching out to the masses and asking each participant to provide a small contribution, entrepreneurs can achieve their capital raising goals like never before.

Supporting this notion and topping the list of the most successful crowdfunding projects ever is the Space Combat video game. The Space Combat campaign raised over $83 million from 898,000 supporters. Runner-up is the Pebble Time smart watch campaign which raised over $20 million. Admittedly, without the Internet and social media these crowdfunding feats would likely not have been achieved.

Jesse Torres and Aaron M. Sanchez Two Men in your Business

Jesse Torres and Aaron M. Sanchez Two Men in your Business

Is crowdfunding a new concept?

The reality, however, is that crowdfunding has been in existence for centuries and has likely existed going back to the earliest days of man. Crowdfunding raises have been referred to as “cundinas” in Mexico as far back as anyone we know can remember. And in nearly every corner of the planet there has historically been a form of crowdfunding used in times of need.

Imagine the farmer in the early days who was in need of tools to prepare his land for the planting of corn. Short on capital he spoke to members of the community, stating that without their support the town would go without corn – an essential staple. Through word-of-mouth and some hustling, the farmer raised the monies needed to purchase the tools needed to prepare the land and ensure corn for the coming season. Did the farmer raise $83 million? Not likely. But he collected what was needed and the community benefitted from its contribution.

Today’s crowdfunding efforts are no different. An entrepreneur in need of funding to launch a new company, product or service uses word-of-mouth via the Internet and social media. And like the farmer, the entrepreneur hustles to make sure that the message gets out loud, clear and into the ears of the right people. Ultimately, as will be described later in this book, a crowdfunding campaign succeeds if it results in benefit to the participants.

During a recent crowdfunding workshop we held in Los Angeles, an attendee raised the point that the only difference is that the farmer had to work a lot harder to get the money. I promptly laughed and noted that crowdfunding has never been harder. Crowdfunding is far from a sure thing. And contrary to popular belief, crowdfunding can be a bitch.

While the amount of crowdfunded dollars continues to grow, the number of start-ups and existing businesses seeking the crowd’s monies is growing at a faster rate. As a result the competition for dollars is intense and requires that entrepreneurs know exactly what they are doing before embarking on a crowdfunding expedition.

Find additional information in our upcoming crowdfunding guide

Two Men in Your Business Guide to Crowdfunding provides entrepreneurs with the roadmap needed to plan and execute a successful crowdfunding raise. This book shows entrepreneurs how to prepare for the raise, how to structure the raise, how to get the word out, how to keep the pressure on, how to use tools that work and what to do once the crowdfunding campaign is over.

Each chapter in this book addresses a different topic. The chapters do not need to be read in order – though we recommend it. Also, this book is concise and to the point. The goal is to provide the needed information in a manner that allows the entrepreneur to get to crowdfunding as quickly as possible.

We are confident that this book will provide amazing value. In exchange, we ask that you use the power of the Internet and social media to spread the word. Happy crowdfunding!

SIGN UP TO GET NOTIFIED WHEN Two Men In Your Business Guide to Crowdfunding is released in July 2015!

https://latinasinbusiness.us/wp-content/uploads/2015/05/jesse-torres-two-men-in-your-business.jpg 450 675 Jesse Torres https://latinasinbusiness.us/wp-content/uploads/2020/11/LatinasInBiz_logo-300x91.png Jesse Torres2015-05-29 09:37:412015-06-17 22:03:25Crowdfunding using social media to fund your startup
crowdfunding money access to capital

The truth about crowdfunding to access capital for small biz

January 9, 2015/2 Comments/in Access to capital, Featured, Investing in your business, Microfunding, Money /by Susana G Baumann

Many small business owners “in the fringe” are looking at crowdfunding as a way to access capital for their small businesses but not everything is as simple as making your plea online.

Posted by Dustin McManus on November 19, 2014 on the Small Business Majority Blog.

crowdfunding, money, access to capital

Q: How do small business owners feel about access to capital?

A: Access to capital has been a persistent problem for entrepreneurs, particularly since the recession. While some parts of the business community have found it easier to secure capital, there are significant gaps in critical areas, such as minority and rural communities, as well as for groups of entrepreneurs like women and veterans. Our opinion polling found that an overwhelming 90% of small business owners nationwide agree that access to credit for a small business is a problem, with 61% agreeing it’s harder to get a loan now than it was before the 2008 recession.

Q: How does crowdfunding relate to access to capital?

A: Crowdfunding is a method of funding by raising monetary contributions from a large number of people, typically online. Small businesses have seen the rapid growth of alternative sources of capital like crowdfunding, which leaves entrepreneurs at risk due to the lack of fair and clear regulations on this new venture. Policymakers must address the risk that comes with alternative sources of capital that balances very real opportunities without stifling this same innovation that has the potential to create more options and points of access to capital for small businesses.

You might be interested: Women business startups apply for seed grant program

Q: How can lawmakers ensure fair regulation of crowdfunding to protect small businesses?

A: The JOBS Act of 2012 required the SEC to issue guidance on crowdfunding. Lawmakers should issue these final rules as quickly as possible, with no further delay, and strike the appropriate balance between oversight and opportunity.

Q: What else can be done to help small businesses access capital more easily?

A: One solution is to change outdated regulations that limit credit unions from meeting small business needs. Currently, there are federal regulations in place that bar credit unions from lending more than 12.25% of their assets to businesses, resulting in businesses belonging to these credit unions having $13 billion less in capital available to them. Bipartisan legislation in Congress would change this and allow credit unions to lend up to 27.5% of their assets, increasing options for small businesses and creating thousands of new jobs with no additional risk for taxpayers.

Q: What about efforts for entrepreneurs that are historically underserved in accessing capital like minorities and women?

A: Continuing to support and expand efforts by the SBA, USDA and other agencies to close gaps through loan guarantee programs will help serve minority, women, veteran and rural entrepreneurs in their attempts to access capital. With innovative new ways of streamlining and simplifying loan-making for small businesses and opening new avenues of capital for them being used, the existing needs of minority entrepreneurs will can be met in order for them to continue serving their function as job creators. Particularly for women, who account for only 16% of conventional small business loans, legislation such as the Women’s Small Business Ownership Act would address this gender gap in lending by expanding or improving SBA programs to reach more women seeking business loans.

 

https://latinasinbusiness.us/wp-content/uploads/2015/01/dollarphotoclub_crowdfunding-money.jpg 450 675 Susana G Baumann https://latinasinbusiness.us/wp-content/uploads/2020/11/LatinasInBiz_logo-300x91.png Susana G Baumann2015-01-09 13:42:052020-06-24 12:11:30The truth about crowdfunding to access capital for small biz
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