Female entrepreneurs and equity crowdfunding: the consequential roles of lead investors and venture stages

Abstract

Previous research has found that female entrepreneurs are disadvantaged in traditional funding markets. Yet, whether the same conclusion can be drawn in the equity crowdfunding market has not yet been determined. Leveraging both stereotype content theory and warm-glow theory, and based on a data set drawn from 259 projects from three equity crowdfunding platforms in China between October 2014 and April 2019, this study empirically examines the underlying relationship between female entrepreneurs and equity crowdfunding. Using Poisson regression analysis, we find that female entrepreneurs are more likely to be funded through equity crowdfunding than their male counterparts. Moreover, we use the presence or absence of lead investors and venture stage (i.e., early versus late) as potential moderators. Our results reveal that while lead investors augment the financing advantage of female entrepreneurs in the equity crowdfunding market, this advantage is weakened in later-development-stage ventures. The findings of this research contribute to the equity crowdfunding and the female entrepreneurship literature by showing that an entrepreneur's gender influences equity crowdfunding performance. Our findings also extend previous research by demonstrating that both lead investors and venture stage moderate the impact of gender in the equity crowdfunding market.

In women, we trust! Exploring the sea change in investors’ perceptions in equity crowdfunding

“…Similarly, Cumming et al (2019) find that female entrepreneurs attract a higher number of investors. Relying on Stereotype Content Theory and Warm-glow Theory, Zhao et al (2020) find that female entrepreneurs are more likely to be funded through equity crowdfunding than their male counterparts.…”

“…In particular, recent literature attributes to equity crowdfunding platforms a democratising force able to provide access to funding to underrepresented categories of entrepreneurs (Cumming et al, 2019). Unlike traditional funding channels, which are limited to a relatively small group of private investors, equity crowdfunding platforms facilitatethrough the use of the internetthe interaction between entrepreneurs and many nonprofessional small investors (Wang et al, 2019;Zhao et al, 2020). In this way, equity crowdfunding enables underrepresented groups of potential entrepreneurs (including female entrepreneurs) to raise funds from diversified sets of investors, democratising access to entrepreneurial finance.…”

Tackling gender bias in equity crowdfunding: an exploratory study of investment behaviour of Latin American investors

“…A growing literature recognises the importance of crowdfunding (notably in the equity-based form) as a new and powerful tool able to democratise entrepreneurial finance by providing, on the demand-side, more access to funding to under-represented categories of entrepreneurs, and, on the supply-side, greater investment opportunities for female investors (Cumming et al , 2019). The democratising force of equity crowdfunding platforms in early-stage financing is due to their role in facilitating the interaction between entrepreneurs and a multitude of non-professional small investors through the use of the internet (Wang et al , 2019; Zhao et al , 2020). While traditional funding channels are limited to a relatively small group of private investors, the equity crowdfunding provides customers with the opportunity to become investors, thereby allowing entrepreneurs to raise funds from diversified sets of investors.…”

New venture entrepreneurship and context in East Asia: a systematic literature review

“…Ng et al (2016) identify feminine entrepreneurial characteristics, such as being personally supportive towards customers, as an important success factor for Chinese female entrepreneurs who use social networks as a platform for their business. Zhao et al (2020) report that female Chinese entrepreneurs are more likely to be funded through equity crowdfunding than their male counterparts.…”