It’s Not Just Physical: Gender and Bias in Equity Crowdfunding


Crowdfunding is a method for raising funds to support for-profit, social, and cultural initiatives.


Sukanya Ayatakshi-Endow specialises in Environmental Economics at Bournemouth University, UK and explores gender and the unconscious bias disadvantages women experience in obtaining access to finance on equity crowdfunding platforms.


Read the original research:


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Hello and welcome to ResearchPod. Thank you for listening and joining us today.


In this episode, we look at the work of Sukanya Ayatakshi-Endow, an experienced academic who has dedicated her time to working in the higher education industry. Sukanya is highly skilled in entrepreneurship, lecturing, and leadership, and is a Doctor of Philosophy – with a focus on Environmental Economics. In this podcast, we explore her latest work which is centred around gender and bias in equity crowdfunding and the unconscious bias disadvantages women experience in obtaining access to finance on equity crowdfunding platforms.


You may have heard of crowdfunding – which is a method for raising funds to support for-profit, social, and cultural initiatives from people and organisations over the Internet. This enables entrepreneurs to use various crowdfunding platforms to fund their business ventures. Historically, access to funds was not as readily available for young firms and start-ups without having to go through ‘traditional’ funding routes, such as grants or bank loans. In fact, in 1997 the first recorded crowdfund of $60,000 was raised on the internet, to support a British rock band to fulfil a North American tour!


Generally, access to funding from traditional sources like banks, has been challenging for women entrepreneurs. As a result, alternative options such as crowdfunding, has been seen to democratise access to finance and is a proposed solution to the problem. But, has this really changed, and, does hidden inequity in fact still exist on these platforms? In 2011, UK data shows that equity crowdfunding was circa 30 million pounds, and this has increased to 360 million pounds by 2018. Although equity platforms have attracted a diverse pool of investors, this relatively new model does not come without challenges, especially concerning gender biases.


By reviewing existing research, Sukanya has uncovered contradictory findings on this challenging topic. Previous research showed that within the non-equity based platform – Kickstarter, women entrepreneurs had high success rates in achieving their funding targets. In addition, a study showed that there were no intrinsic differences between men and women in reaching their targets. So where does bias fit in?


Well, let’s take a look at some more past research, starting with the theme of gender. Entrepreneurship has predominantly been seen as a masculine domain and there is evidence to suggest a gender gap, particularly as women in general have been identified as disadvantaged in relation to bank financing. Research has shown that female firms have poor success in seeking and accessing traditional bank finance and, if they do, they face harsher lending conditions and high-interest rates.


However, the difficulties of gender do not end here. Biases are also shown through research conducted on US equity platforms. Women-led campaigns, on average, received lower funding against their target amounts compared to men. In contrast, other research showed that although women make up 15% of venture funding in the US, there was no evidence of gender biases in relation to the success of fundraisers. As you can tell, there are some research contradictions here!


Existing studies also indicate that investors make subjective decisions based on visual imagery, and ascriptive characteristics of the team. The quality of the offering alone isn’t paramount for a decision. Interestingly, past research also shows that the type of language used to communicate in crowdfunding portrays founder characteristics. In fact, the project descriptions and linguistic style can often indicate the gender of the entrepreneur, however implicit. As the tone, voice, pronunciation, and vocabulary choices vary between men and women, investor decisions can be unconsciously influenced by language style.


Let’s now delve into Sukanya’s study, whose research aims to answer the following question:


“In the context of equity crowdfunding campaigns, is the success of funding related to the gender in a team, or the gender of the language within the campaign?”


To accurately answer this, an outcome variable known as the Success Ratio is used. The Success Ratio is the money awarded compared to the money requested.


In the study, publicly available data from an equity crowdfunding platform Crowdcube was used, which included 397 campaigns with comments. However, campaigns, where women are the primary signatory – which is the individual who is the most responsible – accounted for 130 out of the 397 campaigns. 50% of the campaigns in the sample had reached their funding target. Synergies of ‘maleness’ and ‘femaleness’ were used for investor interactions by using a textual gender analysis tool.


So, how does the textual gender analysis tool work? In short, if a blog had a comment saying “I am pleased with the details within your marketing budget for the campaign” it will create a probability rating, such as there is a 55% chance of it being male and 45% chance of it being female. This is calculated based on the machine learning capability of the textual gender analysis tool, which has been trained using 11,000 blog sources, to demarcate the ‘maleness’ and ‘femaleness’ of the interactions by specifically analysing the vocabulary used.


In her study, Sukanya uses three hypotheses, starting with hypothesis 1, which stipulates that equity crowdfunding campaigns with a higher proportion of females in the team are disadvantaged. In response to hypothesis 1, a variable known as FRT was used to test the relationship between the number of women in the team and the success ratio. The result was that there was a significant negative relationship between the number of women in the team and the success ratio of the campaign. The result is that hypothesis 1 is in fact true!


Now, let’s take a look at hypothesis 2, which considers the following:


“In equity crowdfunding campaigns, the ‘femaleness’ of the gender of the language in the description of the campaign has a negative effect on the success of funding”.


To test this, Sukanya entered the gender variables for text description known as Description Gender. This measures how gender-orientated the language used in the campaign is, and the ratio of male-to-female text. An important consideration was that Sukanya did not find any evidence for gender in the description text in relation to the success of funding thus finding no support for Hypothesis 2.


DiscGen was also applied – the gender inherent in the discussion within comments section. This is a measure of the ratio of the total male-to total female gender orientation in the comments from the backers, calculated for each comment and aggregated, at the overall campaign level. Last, the Gender of the primary signatory, such as the lead of the project, was applied.  The study found support for the above variables including the gender of the primary signatory.


Finally, let’s take a look at the last hypothesis 3…


“In equity crowdfunding campaigns, the ‘femaleness’ of the gender of the language in the discussions and comments in a campaign has a negative effect on the success of funding”.


The result is that there was a positive relationship between the success ratio of funding in relation to the gender of investor comments, which proves hypothesis 3 as true. This proves that the success of an equity crowdfunding campaign is related to any sense of gender inherent within the language of the investors’ comments.


This research is significant because it showcases how biases are similar in equity crowdfunding and entrepreneurial finance such as venture capital funding. An important observation is that there is a decrease in the success of funding when there is a high number of women in the team, even for teams with male and female leads.


Another contribution is that gendered language forms part of an investor’s decision-making when there is an absence of objective information and evidence in campaigns. When this becomes observable, gender, vocabulary, and language become important factors.


So, you may be wondering, how may this research resolve gender equity challenges? Well, Sukanya’s study not only provides insight into the field of gender biases in equity crowdfunding, but also provides useful attributes for entrepreneurs, investors, and policymakers who regulate the crowdfunding market. This research is important in understanding the motives behind investors making an investment and seeking financial returns on campaigns. When this is understood, comparisons can be made between the motivations of equity crowdfunding and venture capital investors.


Needless to say, there are some limitations to the research. Data on unsuccessful campaigns were not analysed which showcases a research gap. It is important to consider research data from campaigns that have failed on equity platforms, or campaigns that are not selected to be launched, as they can offer more insights into gender issues. This can be in the form of an additional inquiry, into the motivations and perceptions that led to failed campaigns.


The data from the research itself shows that women are under-represented in the population of fund seekers, which demonstrates a gender gap, rather than biases against women. We still don’t know whether female investors prefer to support women or not, as the gender of investors was not included in the data. Last, there is contradicting evidence from other studies, where Kanze and others, for example, have concluded that in venture capital both male and female investors were biased against women founders.


A final word for the listeners of this podcast. This study has successfully advanced the knowledge of gender in entrepreneurial finance, by examining the unconscious biases at play when decisions are made. There is a need for more research to be conducted that examines gender nuances in language and interactions within campaigns. Although the study has been supported and backed by other research, it is clear to see that this is just the beginning, though most definitely not the end, of investigations into this important topic.


That’s all for this episode, thanks for listening. Don’t forget to check out the links to the original research in the notes for this episode, and stay subscribed to ResearchPod for all the latest in research news.


See you again soon!


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