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Could Crowdfunding Be the Answer for Female Entrepreneurs?

16/01/2014 11:38 GMT | Updated 17/03/2014 09:59 GMT

Female entrepreneurship is on the rise. Inexorably so. But the debate has moved beyond merely encouraging women to set up their own businesses, to how we can best support and nurture female-led scalable start-ups. That is an entirely different challenge. Female entrepreneurs are still typically at a disadvantage when it comes to scaling their business, particularly as research has shown that less than 5% of venture capital funding goes to female CEO's.

How can we develop an ecosystem to support and encourage more female entrepreneurs? Fundamentally understanding the differences between men and women, and structuring the start-up landscape around this, is the obvious place to start. Attitudes to risk and failure play a big part. Women's more risk averse nature and harsher self-assessment means that in the fierce competition for capital, more often than not those who shout loudest, i.e. men, win. Women's ambition is also organic and takes time to grow - that needs to be recognised as well.

Networks remain a fundamental issue for female entrepreneurs. In the US, 95% of VC partners and 85% of business angels are men, and in a high-growth space that relies heavily on business relationships, women who do not have this natural networking ecosystem will suffer. Women have to more actively pursue building business relationships across gender, which does not always come as easily.

This also translates into access to funding. Women have historically found it harder to access funding than their male counterparts, and this funding gap where men control the capital, has left women-owned companies traditionally smaller and growing more slowly than companies owned by men. Access to expertise, again dominated by men, can also be limited. The challenge is not around changing the women, it is around changing this structure.

Could crowdfunding be the solution? The crowdfunding industry, despite being a relative newcomer to the start-up landscape, grew to $5.1bn in 2013, with industry darling Kickstarter seeing over $480m pledged globally last year. Despite historically existing on the periphery of tight knit VC networks, many women entrepreneurs are finding crowdfunding an effective alternative method of financing, offering open access to capital, networks and visibility.

The impact of crowdfunding can be felt even more significantly in developing countries, where the major obstacle that all female entrepreneurs face is the lack of access to and high cost of credit, largely, according to World Bank Research, because women's businesses have historically tended to focus on lower-revenue lower-growth industries such as agriculture, textiles and retail. Crowdfunding offers a gender neutral platform, and with improving internet access in many of these countries, is increasingly accessible.

All of this chimes nicely with the 'collaborative consumption' movement - the sharing economy undergoing an exponential growth shift. Peer-to-peer lending, which bypasses banks entirely, has also joined crowdfunding as one of the more disruptive innovations challenging the gender status quo.

Research continues to show that if women had the same access to capital as men, this would create in excess of 6 million jobs over the next 5 years in the US alone, with 2 million of those jobs coming in the first year. In the current economic climate, that figure alone is a reason to care.