In Women We Trust: Are Female Business Owners Better at Crowdfunding Than Men?

In women we trust. At least that’s the conclusion of a recent study that found, because females are perceived to be more trustworthy, they are more likely to obtain financial backing by raising money on crowdfunding platforms, than men.

And that’s good news for women who are looking to start a small business, said Michael Johnson, an assistant professor of management in the E.J. Ourso College of Business at Louisiana State University.

“Historically, funding from banks, private equity and venture capital is more likely to go to men because of the perception that business leaders should be masculine,” said Johnson, who conducted the research with Regan Stevenson, assistant professor of management and entrepreneurship, at Indiana University’s Kelley School of Business; and Chaim Letwin, an assistant professor of management and entrepreneurship, at Suffolk University, in Boston.

But, crowdfunding has changed the dynamics of raising capital, according to the study. “A woman’s place is in the … startup! Crowdfunder judgments, implicit bias and the stereotype content model,” which was published in the Journal of Business Venturing.

Johnson said rather than act like men in what is generally perceived as a male-dominated business world, women should act like themselves.

“In this instance, gender bias works in their favor,” he said.

The researchers looked at three years of crowdfunding data from 416 projects and examined the entrepreneurs’ gender, the financial backing received and funding success. To determine the reasons behind their findings, the researchers conducted an experiment with 73 amateur investors in the eastern U.S.

Previous studies have found that female-led firms receive only 1.3 percent of venture capital financing. When private funding is accepted in a startup, women are often asked to give up a higher portion of ownership in the venture. But, because crowdfunding typically signals the early stages of a project, trust becomes a more significant factor for attracting potential investors.

Libby Hikind, founder and CEO of the free crowdfunding website YouHelp.com, said crowdfunding levels the playing field for women and improves their chances for starting a small business. Research has also shown that crowdfunding, which raises smaller amounts of money from large numbers of people, is generally kind to women-backed campaigns.

In a PriceCoopers study last year, women-led crowdfunding campaigns were found to be 32 percent more successful than their male-led counterparts. And the average pledge amount to women-fronted campaigns ($87) is 5 percent higher than contributions to those by men. However, men still raised the lion’s share of financing, primarily because more males use crowdfunding platforms and set bigger targets. Of the 63 campaigns that raised more than $1 million in the past two years, according to the PriceCoopers report, only 11 percent were led by women.

YouHelp.com offers the best in crowdfunding capabilities to forward-thinking men and women who are looking for funds to start a small business as well as nonprofit organizations, groups and individuals who want to connect their causes to the public. The process is simple: create a profile, a fundraising goal, and compelling message that prospects will find worthwhile — and launch. If the idea is deserving, and you do the sharing-out of your campaign work, people will pledge their support.

About the Author: Staff Writer for YouHelp.com