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Building On-Ramps
Results of National Study of Disadvantaged Entrepreneurs
Swart, Curtis, and Zacherl
AGENDAINTRODUCTION
SYNOPSIS
RESEARCH
MODEL
DATA
KEY FINDINGS
PROPOSALS
DISCUSSION
INTRODUCTIONWELCOME
MEETING GOALS
INTRODUCTIONS
STUDY CHALLENGES• Crowdfunding as an entrepreneurial phenomenon is
experiencing a rapid rate of change.• Crowdfunding platform data is not easily
comparable, uniformly understood, defined, and requires a deeper qualitative and quantitative assessments.
• Gender and minority data for crowdfunding initiatives is often not collected, and is not readily available.
• Determining if there is bias against women and minority entrepreneurs is difficult to discern from interviews and focus groups alone.
FRAMEWORK• Crowdfunding is an agile, fluid, hyper-competitive
framework that exists in a unique cultural environment that is not easily deconstructed into current nominal minority segments.
• Crowdfunding acquisition value is substantial. RocketHub was acquired for $15M. GoFundMe was acquired for $650M.
• Corporations have started using crowdfunding for product validation/marketing, validating its potential value as a business tool.
HYPOTHESES
The characteristics and potential for crowdfunding among women and minorities is not well known.
Crowdfunding offers the potential to provide a capital bridge for women and minority entrepreneurs.
There may be barriers to crowdfunding unique to women and minority entrepreneurs.
RESEARCH QUESTIONS
How do perceptions about crowdfunding vary across different alternative funding communities?
What are the crowdfunding new opportunities and obstacles for disadvantaged entrepreneurs, women and minorities?
RESEARCH MODEL - QUALITATIVE
ANALYSIS OF SEMI-STRUCTURED INTERVIEWSIndividual interview questions were developed for each group for the semi-structured interviews. • Group 1: Stakeholders and Advocates for the
Minority Business Community. Interviews were conducted with stakeholders and advocates for the minority business community. These interviews provided data on the challenges and barriers as perceived by members of the minority business community.
• Group 2: Crowdfunding Thought Leaders. Interviews were conducted with thought leaders in donation, reward and equity crowdfunding, These interviews provided a baseline for trends in minority engagement or disengagement in the current crowdfunding processes and the anticipated changes.
QUALITATIVE ANALYSIS OF SEMI-STRUCTURED INTERVIEWS• Group 3: Alternative Sources of Funding Subject
Matter Experts (SMEs). Interviews were conducted with SMEs in alternative sources of funding – Angel Networks, Seed Funds, Venture Firms, etc. These interviews provided insights into how crowdfunding impacts these environments.
• Group 4: Crowdfunding Platforms CEOs. Interviews were conducted with Crowdfunding CEOs to help gauge the accuracy of expectations and trends as described by the industry leaders. These interviews also elicited information on what the industry is doing to address gaps in minority participation.
• Group 5: Minority Entrepreneurs. Interviews were conducted in multiple regions and included African-American, Hispanic, Asian, and other non-white entrepreneurs. These interviews provided insights into how entrepreneurs perceived the impact of the current and future state of crowdfunding on their business communities.
DATA COLLECTION APPROACH• Establish metrics baseline to ensure data
collected throughout the execution validated the integrity of the outcomes.
• Use Literature Review to benchmarking the current environment to ensure the process does not impose bias.
• Developed semi-structured interview data collection plan, collect key data elements, measured and quantified the structured interview responses.
• Analyzed the information to determine the relationships between the variables and the outcomes.
RESEARCH METHODOLOGY – Interview Questions
To ensure that questions cover all research questions adequately, and are not repeated in groups, a spread of questions and prompts were developed for each stakeholder group:
Stakeholders and advocates for minority business communityDo you have experience in alternative funding for entrepreneurs in your community?
What forms of crowdfunding are you familiar with?
How do entrepreneurs in your community get alternative funding as compared to traditional funding?
How does the access to financial capital in your community work?
Is there a difference between how men and women attempt to secure funding?
Is crowdfunding a topic in your business community?
RESEARCH METHODOLOGY – Interview Questions
Thought LeadersWhat characteristics of crowdfunding will most influence it's future?
In your experience, what ethnic groups participate in crowdfunding?
How will crowdfunding change in different communities and ethnic groups?
What are your thoughts on the differences between ethnic groups in initiating a crowdfunding campaign?
How will crowdfunding benefit different communities and groups?
How are they different?
Alternative sources of Funding SMEsHow successful are crowdfunding campaigns in your opinion?
What is your expertise in crowdfunding?
How does success vary in different groups and communities?
How do women and minority entrepreneurs experience crowdfunding?
What are the characteristics of a successful campaign?
What do you think are the reasons for this difference, or lack of difference?
RESEARCH METHODOGY – Interview Questions
Women and Minority EntrepreneursWhat are the perceptions for business financing in your community?
What is your experience in crowdfunding?
How familiar are you with crowdfunding financing in other communities?
Where would you go to learn more about crowdfunding?
What is your experience in alternative and traditional business financing?
What obstacles do you overcome in getting crowdfunding?
Crowdfunding Platform SMEsWhat are the differences between alternative funding and traditional funding for entrepreneurs?
What are the characteristics of a successful crowdfunding campaign?
What makes a successful campaign? What are the barriers that will sink a campaign?
What are the most and least successful groups in alternative and traditional funding?
What are the differences between groups in achieving success in a crowdfunding campaign?
INTERVIEW SCOPEGroup Interviews Group Category
1 17 Stakeholders and advocates for minority business community
2 19 Alternative sources of Funding SMEs
3 34 Thought Leaders4 13 Crowdfunding Platforms SMEs5 14 Minority Entrepreneurs 97 Total
INTERVIEW FEEDBACK EXAMPLES•“ For winning startups, it is easier to get money than it is to get time. Minorities
entrepreneurs are no different; they don't engage with Crowdfunding because of time constraints more than lack of financial sophistication, although they need to be better at both” - Minority Advocate•“In the traditional lending market it is very difficult for minorities to initiate and maintain a banking relationship. Crowdfunding can appeal to a broad swath of minorities and women.” - Alternative financing SME•“Underserved are very skeptical of alternative financing because they have been burned. Developing an education ecosystem would be helpful.” - Minority Entrepreneur•“The affinity groups of minorities are often more limited. If this cannot be fixed it will limit their ability to take advantage of large scale equity crowdfunding. Not everyone who can start a business can run a business” - Crowdfunding Thought Leader•“In the future crowdfunding will open the door for women and minorities to access capital.” - Crowdfunding platform SME
Group 1Stakeholders & advocates• Crowdfunding provides the opportunity to crumble the
barriers to access to capital for women and minorities. • For minorities there is a huge disparity in access to
capital. • Where there are gaps there needs to be a ‘best practice’
ecosystem that provides education resources. • Elements of success will remain the same, must have
business plan with an exit, must build a community of buyers, must develop an emotional connection and, understand how to engage the finance community to secure scalable funding.
• There may be a digital divide that limits underserved populations from gaining insights about crowdfunding
Group 2Crowdfunding thought leaders
• There is no culture anywhere in the world like America where you can promote a business.
• Equity crowdfunding is the real power of crowdfunding and it is too early to really have any programmatic method to educate and promote equity crowdfunding.
• There are apparent barriers: • Minority networks are smaller and have limited
financial resources.• Minority business financing is often very localized
and community focused. Minorities are less likely to go outside their community. The question: how can equity crowdfunding expand the network to provide broader access to a larger affinity group?
• Underserved groups have limited experience/ability to pitch appeals for crowdfunding capital.
Group 3Alternative sources of financing SMEs • Crowdfunding can revolutionize financing for
underserved groups and level the playing field.• Women are adapting to crowdfunding faster than
minorities as there have been communities of women helping women for several years, and the network is broader and deeper.
• When seeking capital to scale, women of color are most often Indian and Chinese. African American women have very strong networks but they are not focused on business.
• There is a problem with financial literacy in the minority communities. This will limit their ability to take advantage of the democratization of access to capital.
• SBA might consider a carve-out in the millions for start-ups. This might help banks serve these markets. Currently in a very high cost regulatory environment for community banks.
Group 4Crowdfunding platform CEOs • Platforms haven't made a specific effort to
exclude or draw out minorities and women; • Could be an unconscious bias on the platform. • There are no built-in biases, however, minorities
may have a limited understanding of how to ‘pitch the story’ and that limits funding.
• Women are excellent connectors crowdfunding fits their social construct.
• Likely to see ethnic centric platforms that align cultural interests and existing traditions.
• Will likely see trends in hyper-local geographic and ‘locquity’
Women and minorities have limited knowledge on how they can leverage crowdfunding.
Minority crowdfunding will likely evolve at the community level.
Crowdfunding provides rapid validation of ideas and branding.
Success of entrepreneur is separate from success of start-up success
Time to Climb is more critical than capital access. When capital access slows time to climb it reduces entrepreneurial and start-up success.
Group 5 Minority entrepreneurs
FINDINGS• Women are more engaged and
successful • There is little capital available in
disadvantaged business communities
• Some minorities appear to be very low participation density
• Financial stresses remains a burden for IC entrepreneurs
• Nearly 50% of projects have come from ICIC identified areas
FINDINGS• Many minority entrepreneurs do not know
what crowdfunding is, though rewards and donations crowdfunding has raised awareness in the minority communities.
• There is a lot of confusion around the different financing options available.
• Minorities lack connections that facilitate the crowdfunding process.
• Language and culture can be a barrier to crowdfunding participation outside of community based crowdfunding.
FINDINGS• The Entrepreneur – Business Model
misalignment may be unaddressed cause for failure
• Psychometric analyses can separate the entrepreneur from the core concept
• Testing/Training focusing on behavioral competencies and characteristics may lead to entrepreneur/business leader behavioral interventions and greater business successes.
FINDINGS• Accelerating the development of the
business idea (Time to Climb) may be more important than access capital at very early stage
• VC deal flows follow crowdfunding• Activating circles of affinity can
have little impact (community trumps policy)
• Need to rapidly categorize and evolve business idea
PROPOSALEXPANDED PILOT STUDY USING DATA ANALYTICS
Proof of concept pilot using selected programs Two/three sites, 10-15 candidates Compare outcomes to previous graduates Graduates of the program would be eligible for
participation in the second stage development program
Accelerate business model evolution from vision to value (time to climb)
Separately assess business ideation and entrepreneur using data analytic models and tools. Determine entrepreneur-business model first rather than product market fit.
Recognize that community trumps policy
