Crowdfunding For Equity Financing Helps Gender Equity, Too

Crowdfunding may level the traditionally male playing field of equity financing, a recent study by Martin Ganco, professor of management and human resources at the Wisconsin School of Business, suggests.

In the entrepreneurship world, equity financing is when investors buy into a startup venture with the understanding that although the venture’s financial future is uncertain, there will likely be some monetary gain or payout at a later date, such as an initial public offering. Research has shown that investors tend to select male founders over female and that women founders have a harder time overall in raising equity capital.

Along with co-author Sofia Bapna of the University of Minnesota, Ganco looked at the issue of founder gender in the context of equity crowdfunding. While the majority of investors in equity crowdfunding tend to be male, just like in traditional equity financing, the crowdfunding platform differs from traditional equity financing because it is not restricted to experienced investors—inexperienced investors can also participate. Ganco and Bapna wanted to explore whether the same preferences would hold true for this new platform: Would investors relate to female founders in the same way as they did in traditional equity financing, and what role, if any, might investor experience play?

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