When Raising Capital Online, The Gender Gap is Shrinking

One of the best-documented phenomena in the financial world is the “gender gap” — especially when it comes to raising capital for a small business or startup. Historically, women have been much less successful than men at securing investors for their businesses, whether from a bank or venture capital firm.

While women own nearly a third of all businesses in the US, a recent senate report found that they receive only 4% of the total value of all conventional small business loans. Similarly, female-led startups receive just 7% of all venture capital funding. A 2013 study out of MIT found that pitches delivered by men were 60 to 70% more likely to be funded than pitches delivered by women, even when the content of the pitch was exactly the same.

Buried in these statistics, there is one beacon of consolation: when raising equity capital for businesses online, female-led companies are coming close to gender parity. On CircleUp, where entrepreneurs have raised over $100 million for their businesses, female founders are doing quite well. In fact, they are 9 times more successful raising capital online than with traditional banks, and 5 times more successful when compared to venture capital funding.

When it comes to raising capital for businesses online, the future is looking increasingly bright for female entrepreneurs.

A Level Playing Field Online

On CircleUp, 34% of all capital raised has gone to female-led companies. Though this figure still falls short of gender equality, it’s vastly higher than those of small business loans and venture capital.

Of course, for the gender gap to be eliminated, 50% of all capital would need to go to female entrepreneurs. Even in the much-improved online fundraising arena, we’re just not there yet.

There’s a rather encouraging explanation for this: less women apply to raise money than men (women only make up 32% of the applicants). Taking this into consideration, when women attempt to raise their funding rounds online, they actually have a much higher success rate than men do.

Not only that, but female-led companies appear to be able to command better valuations than comparable male-led companies:

For two businesses with the same amount of revenue — one female-led, and the other male-led — the former achieves a 26% higher average valuation on the CircleUp platform.

So, while we have yet to achieve gender equivalence in the world of online funding, there is a strong indication that the playing field will soon level.

Why Are Women Faring Better Online Than Elsewhere?

So, why are women able to raise capital more effectively online with CircleUp, than through traditional banks or VC funds?

A possible explanation is that CircleUp is focused on consumer products and retail — both of which have a higher representation among female founders. The results of women finding greater success with fundraising online, however, are not exclusive to CircleUp. Last year, a study found that female-led Kickstarter campaigns out-performed campaigns by men, especially those related to technology. Even outside of the consumer products industry that CircleUp focuses on, women are seeing strides with fundraising online.

This success could also be attributed to the relative gender anonymity of the Internet. When raising money on the internet, the founder’s sex is less apparent than when going to a bank and asking for a loan, or presenting at a venture capital pitch meeting. Noha Waibsnaider, who raised money on CircleUp to fund her company, Peeled Snacks, corroborates this. “With the exception of some phone calls and videos,” she says, “most of the communication with investors on CircleUp is via written documents.”

And when you’re evaluating a business mostly on text and numbers, it turns out female entrepreneurs do very well at fundraising.