Several years ago I got one of the early beta invites from Kickstarter and I thought I was SO cool. I could come up with any sort of creative project, get it funded, and quit my day job -- the possibilities were endless! I never could settle on something that seemed worthy of a pitch video, though, and so my initial experience with crowdfunding entailed sending my five precious Kickstarter invites out to creative friends I thought could put them to good use.
As the years went by and Kickstarter was joined by IndieGogo, GoFundMe and then eventually by equity crowdfunding platforms with "real" investors like CircleUp, the requests to financially support my friends' creative projects started coming fast and furious. I was getting at least three a month and usually more. They ranged from pretty solid book or documentary film ideas to requests to essentially fund time off. At first I got annoyed, and I'll admit to cracking the "crowdfunding is panhandling for the non-homeless" joke a few times.
Then it started bothering me for a different reason: Why was there no other way for cultural projects of value, or small companies with a great product, to get funding? Initially crowdfunding had seemed like this great, creative, alternative way to finance things, but was it possible that it was also distracting us from demanding real change from financial institutions? Sure, it's great to have the option of crowdfunding -- having multiple consumers back a product you're selling is the ultimate proof point that you're on to something -- and a funding source with a higher appetite for risk than banks or venture capital investors has undoubtedly helped to spur innovation over the past few years. But the crowdfunding boom has also, in some ways, let traditional financial institutions off the hook, especially when it comes to funding women- and minority-owned businesses.
And those institutions desperately need to change. A recent study conducted by the Commerce Department concluded that women- and minority-owned firms “experience higher loan denial probabilities and pay higher interest rates than white-owned businesses even after controlling for differences in credit-worthiness, and other factors.”
Which brought me to another problem: There's a perception on the interwebs that crowdfunding is more equitable than traditional financing. That may be true (traditional funders are not as forthcoming with their demographic data as crowdfunders), but "more equitable" does not necessarily mean "equitable." To wit, Kickstarter visitors are heavily male (76%) and even Indiegogo, which is often deemed "woman-friendly," is 58% male. In more positive news, women tend to raise more money than men on Indiegogo, and on CircleUp--an equity crowdfunding site, which means it brings more traditional investors into the crowdfunding fold -- the majority of businesses are women-owned. The last year has also brought the launch of sites like Plum Alley and Black Startup, which cater solely to female and African American entrepreneurs and investors, respectively.
As I was losing many hours of productive time down the rabbit hole of pointless Google searches about crowdfunding, the option to crowdfund my own project presented itself again. This time in the form of a digital magazine that would be run by myself and five other female environmental journalists on a new media platform called Beacon. The idea behind Beacon is that it gives writers a platform through which they can create their own microsites and magazines and sell subscriptions directly to readers. Beacon takes a modest cut, and the rest goes straight to writers. There are no advertisers so the site's contributors are accountable only to its readers. The platform recently decided to try crowdfunding campaigns around particular projects, and ours would be the first magazine-style project.
Actually participating in crowdfunding has revealed more pieces to the puzzle. As the six of us discussed our pitch video, we debated whether we should show ourselves in the video at all. We didn't want to draw attention to the fact that we're all women, didn't want to deal with whatever comments that might draw, didn't want people forming opinions about "the Asian one" or "the ambiguously ethnic one." We wanted people to focus on the stories we planned on telling rather than the people telling them.
It's that sort of thinking that has various pundits talking about the gender neutrality of crowdfunding. In one recent Women 2.0 story, the female founder of an equity crowdfunding site wrote about how not having to stand up and give a presentation in front of investors worked in women's favor. Similar things have been written about how crowdfunding is helping out minorities. Seriously. What the actual fuck? Because if someone sees that a woman is behind something, or a minority of either gender, that automatically skews their opinion of it? While I know that may be true, I think encouraging women and minorities to go through alternative funding channels, to hide behind the Internet as it were, rather than insist that bankers and venture capitalists stop being sexist and racist, is classic separate-but-equal logic.
I'm not saying crowdfunding hasn't helped by at least offering an option. According to Jules Pieri, entrepreneur in residence at Harvard Business School, VCs invest less than 5% of their powerful capital in businesses with women founders. Minorities have the same dismal odds. And a peek at the loan records of any major bank tells a similar story. In 2011, a jury in Los Angeles found that Wells Fargo “consistently and knowingly discriminated against borrowers in minority neighborhoods, resulting in these borrowers paying more for their loans than borrowers in non-minority areas.”
So having a new investment option is great. The problem is that it should be exactly that -- an option -- not the only source available to you. And if you're thinking to yourself, "This is a #firstworldproblem," OK. But the majority of small businesses that are crowdfunded are started by people who aren't particularly "first world," that's part of the reason they're going to the public and not a bank in the first place. A large part of the appeal of crowdfunding is precisely that it does not require that you have a network of wealthy friends and family, just a good idea and the skills to communicate it.
To that end, our male partners at Beacon encouraged us to think otherwise about our video, noting that readers like knowing there are real people behind these campaigns, and seeing nothing at all strange about the fact that we're all women. Eventually we started talking about it as a positive. Perhaps even an interesting selling point.
We're about halfway through our funding period now, and so far only one male former colleague has commented on our female-ness, suggesting that we add an older male to round out the team and "lend credibility." Sexist, for sure, but not as bad as we were expecting. I hope that ultimately crowdfunding influences traditional financing mechanisms and begins to erode the stereotypes about women and minorities in business. In the meantime, I suppose something is better than nothing, and I've come to the realization that an all-female science magazine would probably have zero chance of ever existing without crowdfunding.
Shameless plug: If you want to subscribe to a great science magazine written by women -- and who wouldn't? -- please consider supporting Climate Confidential on Beacon!