Crowdfund Insider | Sherwood Neiss | May 2, 2017

Regulation Crowdfunding finished its fourth Calendar Quarter this past March and the data shows that women and minorities have a higher percent chance at hitting their minimum funding target but represent fewer campaigns and receive less capital.

While the overall market is beginning to show signs of traction with over 265 companies trying their hand at Regulation Crowdfunding, the clear majority of them are founded by teams of white men. Given the opportunity for Regulation Crowdfunding to provide on average $300,000 to funded campaigns, this represents a missed opportunity for women and minorities who often find themselves alienated from the capital markets.

Regulation Crowdfunding allows any American startup or small business to raise up to $1,070,000 million from friends, family and followers on debt and equity crowdfunding platforms registered with the Securities & Exchange Commission (SEC).

Just like on donation or rewards sites, issuers launch Campaigns and use their social network to invite people to review their business plans, market opportunity, financial statements and video pitch. However, instead of getting a token of appreciation or a widget, backers get shares in a business or interest repaid on a loan.

See:  SEC Updates JOBS Act Amendments Including Reg CF Funding Cap

Since the launch of Regulation Crowdfunding on May 16, 2016, 265 companies have filed with the SEC. Of those companies, 50% were successful in hitting their minimum funding target and $25.4M was funded to those companies.  With the average campaign lasting only 93 days, compared to the many lengthy and cumbersome alternatives like applying for an SBA loan or seeking VC money, Regulation Crowdfunding seems to be a viable alternative. However, this seems to be true if you are a white male and have more than one founder.

• Digging into all the offerings, 165 campaigns (62%) were started by White male founders, 43 where there was at least one woman founder, 26 where there was at least one minority, 8 that were run by women-only founders, 14 by minority-only founders and 10 by founders that were both women and minorities.
• Adding it up, women and minority led companies only represented 37% of all offerings.
• When filtered for only successful campaigns, 82 companies hit their minimum funding target, closed their offerings and received their funds. Of those 82 only 7 companies were founded by ‘women only’ teams, 6 by ‘minority only’ teams and 1 by a team of ‘one woman and one minority.’ The other 68 were by founders that were white men.
• When looking at success percentages, campaigns run by women-only founders had an 87.5% success rate compared to 41% for men-only founders. Minority-only founders also had a higher success rate (46%) than men-only founders.

Given the high success rate (particularly compared to VC funding), it is surprising that more women and minorities don’t give Regulation Crowdfunding a chance.

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