- March 10, 2020
- Posted by: Kirsten Campbell
- Category: Blog
Crowdfunding is looking like it could be the antidote
*bangs head against desk*
We know that multicultural workplaces can expect to generate 19% more revenue and outperform competitors by 35%. Yet, check-writing VCs still aggressively favor white men who graduated from Stanford. Even if they didn’t graduate from Stanford, if at all, white guys funding white guys just seems to be business-as-usual in the universe of venture capitalism. What’s arguably more egregious is that a fallen angel like WeWork “got more money than female founders did in 2019.” The messy WeWork implosion may have left a lasting impression on the market, but that doesn’t negate the fact that the year’s “most notorious startup flameout” still scooped up at least $5 billion from Softbank alone.
A company that subleases office space is hardly a tech darling poised to change the world (no matter what kool-aid Adam Neuman was serving), but that didn’t stop WeWork from receiving “$1.5 billion more than the total VC investment in all female-founded companies combined during the same period.” This is far from an anomaly. Just the year prior, Juul pocketed $10 billion more investment money than female founders in 2018, and they’re under investigation by nearly 40 states for what essentially tantamounts to predatory practices on teens. Between Juul and WeWork, the combined $15 billion could have funded a staggering amount of other startups with tangible value and true market potential. It’s almost incomprehensible how much money that is, as well as the loss of what else it had the power to accomplish, if in different hands. Another sliding door in the tech universe.
Why don’t you get a JOB?
Since the JOBS Act came into effect in 2016, considerable data has been collected which showcases a flourishing startup ecosystem with a much higher average success rate of 60%, a wider variety of industries and a geographic reach that extends far beyond the usual three states of California, New York and Texas. After decades spent watching interchangeable founders tout how ‘disruptive’ their companies supposedly are, crowdfunding has been quietly and steadily proving that there’s another road to startup capital.
According to Sherwood Neiss, companies across 58 industries have received funding and turned more than 327,000 people into investors. Rather than pouring money into unimpressive ‘tech’ startups like WeWork, crowdfunding has facilitated capital to industries routinely ignored by VCs, like entertainment, restaurants and education. In fact, unlike venture capital money, 80% of crowdfunding proceeds go to the top 17 industries. That’s a much wider playing field for founders than the narrow, almost pathological focus on tech.
Hello from the other side
Clearly the crowdfunding ecosystem is proving the fact that when everyone else (ie. not white guys from Stanford) has a more equitable shot at funding, communities and small businesses tend to thrive. Crowdfunding also highlights that there’s plenty of talent and excellent ideas that don’t reside in Silicon Valley. A robot pizza maker has zero potential to change the world, yet it received boatloads of cash from Softbank. What would happen if that money was instead redirected toward startups that are working on actually positively impacting our culture and values? The underfunded ideas of founders across America have immense potential to change our mindset, as well as the world. The SEC has even taken notice and decided to propose an increase in the maximum raise amount from $1M to $5M.
Crowdfunding is getting a lot more powerful and local communities are slated to be the beneficiaries