Friday, May 03, 2024

Report examines Reg Crowdfunding results for women- and minority-owned businesses

By Anne Sherry, J.D.

A report commissioned by the SEC’s Office of the Advocate for Small Business Capital Formation finds that investors undervalue crowdfunding offerings by women and minority entrepreneurs. If disparities in funding continue, Regulation Crowdfunding could perpetuate inequalities in business outcomes. The report suggests that government and Reg CF platforms should try to encourage participation by and offer support to women and minority entrepreneurs, as well as attempt to counter investor bias through educational programs.

Seven years of crowdfunding. The proportion of women among all individual entrepreneurs participating in Reg CF increased from 17.3 percent in 2016 to 22.5 percent in 2022. Reg CF startups also became more racially diverse, with the proportion of white entrepreneurs decreasing from 83.4 percent in 2016 to 73.0 percent in 2022. As for gender diversity, in 2016, 79.2 percent of founder teams using Reg CF were entirely male; 11.2 percent were mixed gender; and 9.6 percent were all female. By 2022 the proportion of mixed-gender and all-female teams had increased to 17.8 percent and 14.2 percent, respectively; only 68 percent of founder teams were all male.

While these numbers do show increasing diversity among Reg CF businesses, the report notes that participation by women and minority entrepreneurs still lags compared to the overall business owner population. According to the report, this underscores the critical need for policy intervention to increase the visibility and accessibility of Reg CF to women and minority business leaders.

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