Crowd Investing, a Solution for the Gender Funding Gap
Women make up more than 50% of the U.S. population, and they have grown to be 47% of the workforce. They have surpassed men in educational attainment, with over 33% of women having a bachelor’s degree or higher. Women control $14 trillion, or 51%, of U.S. personal wealth and are now the primary source of income in over 40% of households.
The Rise of the Female Entrepreneur
According to an SBA Report in 2012, women were majority owners of 9.9 million businesses which generated $1.4 trillion in sales and employed over 8.4 million individuals. In addition to another 2.5 million firms were equally-owned by women and men, and they accounted for another $1.1 trillion in sales and 6.5 million jobs. As majority and joint business owners, women entrepreneurs generated $453 billion in payroll for 14.9 million workers through over 12.3 million businesses.
The number and economic contributions of women-owned firms continue to rise at rates higher than the national average – with even stronger business formation rates seen since the recession. As of 2016, it is estimated that there are now 11.3 million (11,313,900) women-owned businesses in the United States, employing nearly 9 million people (8,976,100) and generating over $1.6 trillion ($1,622,763,800,000) in revenues.
According to a report by American Express, between 2007 and 2016, the number of women-owned firms increased by 45%, compared to just a 9% increase among all businesses. Over the past nine years, the number of women-owned firms has grown at a rate five times faster than the national average. Employment in women-owned businesses has increased by 18% since the recession, while among all businesses employment has declined 1% since 2007. Business revenues among women-owned firms have increased by 35% since 2007, compared to 27% of all U.S. firms at a rate that is 30% higher than the national average.
Women of Color Are Making Tremendous Strides in Business
Growth has been unusually rapid among black and Hispanic women, who now make up about 14 and 11 percent of total women-owned businesses, respectively. But despite all of the gains women have made recently in the business world there are still significant challenges that exist. Women business owners still face a considerable wage gap and continually have smaller amounts of startup capital than their male peers.
Funding Issues Still Exist
Women-owned businesses make only about 25 cents for every dollar their male counterparts earn. That’s a much more substantial gap than the one that exists in the overall labor market, where the median earnings of women were about 83 percent of men's, according to data from the Economic Policy Institute.
Women-owned businesses are far less likely to have any start-up capital, and when they do, they have much less than men-owned business. Women who own businesses many times find themselves in a sort of vicious cycle when it comes to funding. Some women report a difficult time to obtain loans, and when they do succeed, sometimes the terms are less favorable. Women's businesses are often smaller and concentrated in areas that bring in less income than their male counterparts, that might make them less attractive candidates to banks, who in turn give them smaller loans or more stringent terms.
Crowd Investing is a relatively new phenomenon in the U.S. Until very recently, and thanks to Title III of the JOBS Act, which passed in May of 2016, now, anyone and everyone can invest in startup companies in exchange for equity. Crowdfunding is an excellent option for women-led startups because of the excruciating amount of time spent in meetings with investors can now be eliminated from a far more efficient model that provides founders to target people directly and open up the investment to the crowd.
Crowd Investing is a viable funding option for female entrepreneurs, who often can face an uphill battle when raising money through traditional channels where the vast majority of angel investors and venture capitalists are men. Launching a crowdfunding campaign can be a daunting business move, one that requires you to gain the trust and loyalty of strangers and convince them that your idea will be a success. But by democratizing the fundraising process and allowing individuals to invest as little or as much as they want, equity crowdfunding enables women to broadcast their ideas and personalities to a broader, arguably more receptive, audience.
Another benefit to crowd investing for women is that as female-led businesses become more successful based on increased revenues and profits, these women will be in a much better position to become the much-needed investors in other women-led startups. This new class of female crowd investors will bring with them capital and experience to mentor the women that follow them down the arduous but exciting and fulfilling path of entrepreneurship.