Crowdinvesting - a solution to the gender funding gap?

Female founder teams received just 1 percent of venture capital in Europe in 2022, compared to 4 percent in Switzerland in 2021. There are a number of causes for this, but one of the most significant is probably this: The traditional startup investors, i.e., the mostly male venture capitalists or business angels, seek out tech startups that are aiming for infinite growth.

Zebracorns instead of Unicorns

Among these startups, there are certainly those that were (co)founded by women - such as the Australian graphic design platform Canva or the Indonesian fintech company Xendit. However, a lot of women found businesses that are not only aiming for economic growth, but also to improve the environment or society. According to studies, 54 percent of women give these dimensions a high priority, compared to 39 percent of men.

There is even a name for this movement away from just growth-oriented startups: the zebracorns. The phrase was coined by a group called Zebras Unite and is a reference to unicorns, a term for startups with a market value of over one billion francs. Zebracorns, in contrast to unicorns, actively advocate core values such as sustainability, inclusivity and cooperation and are thus opposed to the conventionally solely profit-driven startup world.

A stock exchange for startups

However, the number of zebracorn supporters among traditional investors is still vanishingly small: So how can startups with sustainable business concepts still access the funding they need? A novel method of funding is crowdinvesting. The concept: Instead of relying on large investors, the crowd comes into play. This refers to individuals—a community—who support the company's business strategy. They can co-own a startup for as little as a few hundred francs; similar to the stock market, they receive a share of the business in exchange for their investment. In this way, they participate in the success of the startup. Additionally, they invest in a concept that strives for long-term growth rather than just quick success.

This is also the difference between crowdinvesting and the more familiar crowdfunding. In crowdfunding, supporters do not receive shares in the startup in return, but a product or a service. Thus, they remain «only» supporters and do not become co-determining owners of the startups. Crowdinvesting platforms, on the other hand, establish a sort of stock exchange for startups, revolutionizing the financial industry while simultaneously democratizing it. Stock exchanges are typically only available to large corporations, while startups are typically small businesses and can only list their shares for the general public at great expense and effort.

Bank loans, strategic investors (also known as venture capitalists or VCs), or individual investors are the traditional ways for startups to obtain funding. As a consequence, there are corresponding influences and dependencies. However, with crowdinvesting, fans and members of the startup community become co-owners. They can not only participate in the decision-making process at the general assembly, but also help to support the startup, whether it's through customers, advertisements, or the acquisition of stock. Therefore, crowdinvesting is a good way to remain in touch with the wishes of the community.

Women invest in women

Such «startup stock exchanges» already exist in Switzerland, such as Conda or Aktionariat. Additionally, the first swiss startups have successfully tested swarm funding over the past two years. Particularly sustainable startups have broken records. Inyova, a financial platform, attracted nearly 3000 investors and earned about seven million francs through crowdinvesting last year. On the other side, fashion producer Nikin raised five million francs through a crowdinvesting last December.

And startups founded by women? So far, at least in Switzerland, there are currently no female-led companies that have dabbled in crowdinvesting. However, studies do indicate that women have great success in the related crowdfunding. On the swiss crowdfunding site wemakeit, female-led initiatives typically have on average a 60 percent higher success rate. Furthermore, women are frequently found among supporters on crowdfunding sites. «Women invest in women», wemakeit CEO Céline Fallet told elleXX in an interview.

Whether women are also more successful at crowdinvesting remains to be seen. However, it might be an opportunity to at least partially close the gender funding gap. Additionally, research suggests that a stronger emphasis on startups with a social and sustainable mission could encourage more women to pursue careers in entrepreneurship.