by Geri Stengel, @Venturneer
Whether women entrepreneurs are raising money for their businesses through Kickstarter or CircleUP, they perform equal to or better than their male counterparts when raising money online. It turns out that women entrepreneurs have what it takes to succeed according to Stand out in the Crowd: How Women (and Men) Benefit from Equity Crowdfunding research commission by Dell and Ellenoff, Grossman & Schole.
In rewards-based crowdfunding, entrepreneurs use platforms such as Kickstarter and Indiegogo in which the funder receives a tangible item or service in return for their money. Some businesses collect the cost of the item from customers before the product is manufactured, beta test products, or raise money in exchange for a token gift.
How equity crowdfunding is different
In equity-based crowdfunding Investors receive a stake in the company. Currently only friends, family, and accredited investors (a.k.a. wealthy people) in the United States can invest in a company for equity. They can do so through websites such as AngelList, CircleUp, Crowdfunder, and Portfolia. More about this in a bit.
A way around the boys’ clubs?
Crowdfunding is leveling the playing field for female founders with skills, ability and ambition to scale companies, who might have previously encountered pushback and closed doors from the traditional boys’ club of VC firms,
Women outperform men because women have the skills, including project management, marketing, storytelling, meeting milestones, being frank when mistakes happen, and communicating clearly – without jargon, with realistic revenue projections and words that align with actions. Of course, they are also excellent at followup.
Equity crowdfunding and startups
Start-up companies can demonstrate to potential investors that a product has traction by conducting a rewards-based campaign before asking for investor funding. Those who did so were able to raise money from angel investors.
- Sara Andrews founded Bumbleroot Foods, which makes drinks and snacks from wild harvested, super nutritious fruits from Africa. She raised money through a rewards-based campaign so she could manufacture and distribute her drink. The rewards-based campaign showed product traction that enabled her to raise equity crowdfunding.
- Julie Bombacino’s Real Food Blends, makes nutritious meals from real foods packaged in a pouch that can be used with feeding tubes. She raised money through a rewards-based campaign to cover the costs of production, distribution, and marketing. She credits her successful rewards campaign with helping her raise an additional $550,000 offline.
Other startups combined offline with online funding raised privately via crowdfunding platforms.
- Cynthia Schames’ AbbeyPost uses an algorithm that, with just a few measurements, enables the creation of attractive, well-made clothing that fits plus-size women. She raised $625,000 from angels both offline but in some cases facilitated the some of the transactions online.
- Cybele Pascal turned her expertise in creating delicious recipes for people with allergies into a line of products you can get at the grocery – Cybele’s Free to Eat. She raised money online via Series A financing to expand her customer base. Her seed round was raised offline.
- Jenny Lewis and her cofounder have created a craft brewing company, Strike Brewing, that caters to people with active lifestyles. They raised money offline, for capital equipment acquisition offline, but facilitated some of transactions online.
Kara Goldin, Hint Inc., makes flavored water with no added sweetener. She has raised money from both angels and venture capitalists in the past, but hit a dead-end when she tried to raise institutional money to expand her e-commerce model. But she raised $2 million in 10 days by reaching out to her most avid fans – employees of technology companies in Silicon Valley. She did this privately via a crowdfunding platform.
Start-up companies are raising equity financing by advertising their security offerings.
- Paige Cattano is one of the cofounders of Wonder Technologies, which has developed patent-pending technology that enables credit cards to be used as gift cards by any merchant. It raised $400,000 for product development and marketing/customer acquisition.
- Tawnya Falkner created Le Grand Courtage, a line of sparkling wines. Her company raised $400,000 for inventory and marketing. Last year her company’s revenues grew 450%.
Growth companies and equity crowdfunding
Growth companies are also raising equity financing by advertising their security offering.
- Wendy Strgar of Good Clean Love needed money to produce inventory so she could expand distribution for her all-natural, organic intimacy products. She not only found money for inventory, but also business expertise and investors who are aligned with her values.
- Courtney Nichols Gould and her husband have grown SmartyPants Vitamins by 200% annually since it launched five years ago. It’s the TOMS Shoes of vitamins. For every bottle sold, it distributes a bottle of vitamins to people in need. In May 2014, SmartyPants closed a $2.2 million financing round.
Geri Stengel, guest writer, is founder and president of Ventureneer, a content marketing, market research and education company which helps corporations reach small businesses though branded marketing and social media opportunities that generate visibility, thought leadership and brand loyalty.