Rewards-based crowdfunding has the promise to democratize entrepreneurial finance by opening up entrepreneurs’ pitches for products to the diverse pool of backers worldwide. And it is making an impact. For example, while in 2020, the entire US venture capital industry funded around 6,500 early-stage deals, Kickstarter—the most prominent reward-based crowdfunding platform—alone funded almost three times as many entrepreneurs in the same year. In doing so, it also contributes to reversing the gender gap in entrepreneurial finance. In venture capital, women are commonly penalized (less likely to get funded, or getting less money), as they do not fit the masculine standard of a successful entrepreneur. In contrast, findings from nine leading reward-based crowdfunding platforms worldwide show that female entrepreneurs succeed at a 32% higher rate in acquiring funding than male entrepreneurs (PricewaterhouseCoopers, 2017).

Interestingly, while the mission of many rewards based crowdfunding platforms (like Kickstarter) is to democratize funding for innovation, past research shows that mentioning words like “novel”, “innovative” or “revolutionary” in crowdfunding campaign texts actually has no or even negative effects for campaign performance. This puzzle led Benedikt Seigner (LMU), Prof. Hana Milanov (TUM), and Prof. Aaron Mckenny (Indiana University) to examine the question: Who can use innovation claims in rewards-based crowdfunding and benefit from them?

The authors studied 2,185 Kickstarter campaigns and showed that women entrepreneurs, especially in male-typed industry contexts like technology, benefit the most when using innovation claims. The study explains these findings relying on Expectancy Violation Theory (EVT). The theory suggests that engaging in counterstereotypical behaviors (like women claiming innovation) will result in favorable impressions of and actions towards the “violator”. This is especially the case when women compete in male-typed contexts like technology, which draw further attention to their sex, due to general absence of women in these categories.

This study helps better understand gender dynamics in rewards-based crowdfunding. While prior work demonstrated that the diversity of backers and their activist ambitions support women in this context, this study shows that women can smartly build on this momentum. Specifically, women can actively further their campaign’s success if they choose campaign language promoting innovativeness of their products, especially in male-typed sectors like technology. By triggering gender expectancy violations, women can use language to work to their advantage. 

Author: Prof. Hana Milanov, PhD
E-Mail: hana.milanov@tum.de
Chair: International Entrepreneurship

Source: Seigner, B.D.C., Milanov, H. & McKenny, A.F.: Who can claim innovation and benefit from it? Gender and expectancy violations in reward-based crowdfunding
Strategic Entrepreneurship Journal: Special issue on “Catalyzing change and innovation in women’s entrepreneurship"