Saturday, August 23, 2014

Crowdfunding and Gender

The SEC is in the process of crafting rules to facilitate crowdfunding of unregistered securities offerings.  There's been a lot of back and forth about the merits of this idea - Michael Dorff, for example, has argued that it's a sucker's game, because the only businesses that will require crowdfunding are those too toxic for angel investors to touch.  Meanwhile, Steve Bradford just posted about a study suggesting that the "crowd" is better at identifying winning business ideas than individual investors - even the professionals.

One idea that's been floated, however, is that crowdfunding will open doors for disadvantaged groups - like women.

Indiegogo, a crowdfunding website, recently boasted that women founders reach their target funding in much greater numbers than do women who seek startup capital through traditional means.  Women have had similar results on Kickstarter.

There's been a lot written recently about how women fare poorly in the tech world when they seek startup funding.  Women report navigating a lot of pretty toxic sexism from the mostly-male angel investors with whom they must negotiate.

I have my doubts about the viability of crowdfunding, but I'll be interested to see whether it can also level playing fields in unexpected ways.

http://lawprofessors.typepad.com/business_law/2014/08/crowdfunding-and-gender.html

Ann Lipton | Permalink

Comments

As you know, I also have my doubts about the viability of crowdfunding under the existing statute and proposed SEC rules. But, if it's fixed so it's workable, I'm also interested to see its effect on entrepreneurship by people in the lower economic strata. Venture capital to me often seems to be a good old boys club not only in the gender sense but also in the economic sense--populated by people who grew up with money and/or went to all the right schools. That's an overgeneralization, of course, but there is some truth to it. I want to see if crowdfunding can benefit entrepreneurs who grew up in my type of neighborhood.

Posted by: Steve Bradford | Aug 23, 2014 5:42:28 AM

Yes, absolutely! I'm also interested to see whether there's a racial effect - I mean, I don't know what the stats are like for ordinary startups, but I wouldn't be surprised if there's a disparate racial impact, as well. And there's a study showing racial discrimination in sales on ebay (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1934432). I wonder if crowdfunding might allow people to conceal gender/race/class markers - not an ideal world, of course, but I wouldn't blame entrepreneurs for doing so - and attract more capital that way.

Posted by: Ann Lipton | Aug 23, 2014 6:14:54 AM

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