Yahoo Finance The new way Australia's female founders are fundraising millions
When entrepreneurs Melanie Leahy and Elisse Alexander decided they wanted to build a dating app, they knew they wanted to use equity crowdfunding to make it happen.
The pair’s dating app, Ziinkle, offers the usual swipe and chat functions, along with a feature allowing users to scope out potential venues where other singles are mingling. Now, they’re looking to raise money through equity crowdfunding to take it to the masses.
Equity crowdfunding is a way for unlisted companies to raise the money to launch and grow a business. In a similar way to crowdfunding, interested parties can choose to put money in to support the project’s growth.
By putting money into the equity crowdfunding, investors also gain part ownership of the business and the opportunity to make returns, as with any investment.
Ziinkle is currently taking expressions of interest from investors on equity crowdfunding platform Birchal, with the two hoping to raise between $500,000 and $1 million.
For Leahy and Alexander, the appeal of equity crowdfunding lies in the ability to raise capital, but also to create a pool of engaged Ziinkle users they could call on to test the app while they were building and improving it.
“When we reach day one, we will already have a community of people who will download and sign up and start using it,” Leahy told Yahoo Finance.
A new breed of founders
In Australia, Leahy and Alexander are part of a growing group of female founders choosing to use equity crowdfunding, and finding success.
Female-led businesses raised 25 per cent more in their equity crowdfunding campaigns in 2020, and had more than three times as many investors as businesses that didn’t have a female founder or-founder, Birchal has found.
And in June this year, Bubble Tea Club founded by Pam Yip and Jenny Le reached a new Australian equity crowdfunding level, with 2,976 people expressing interest and ultimately raising $1.6 million.
That eclipsed the former $700,000 first fundraising record held by female-led and focused rideshare app Shebah.
More broadly, equity crowdfunding is booming.
Australia’s equity crowdfunding sector doubled in size in the year to July, while Birchal – which represents 70 per cent of all equity crowdfunding in Australia – saw its June 2021 figures up 620 per cent on the previous year.
“Equity crowdfunding democratises the investment process, by enabling businesses to raise investment online from their most passionate customers and fans,” said Birchal co-founder and managing director Matt Vitale at the release of the company’s annual report.
“The industry is proving to be a resilient and reliable funding source for small businesses and startups, and a great way for retail investors to get exposure to a new and exciting asset class. It’s the go-to funding source for Australian early-stage businesses now.”
Financial services and the food and beverage industries are so far showing the biggest demand for equity crowdfunding, followed by software and healthcare.
Female founders’ success with equity crowdfunding is partly the ability to connect with investors “on the ground floor”, and a reflection of the wider success of female-run businesses.
A Boston Consulting Group study released in June 2018 found that for every dollar of funding funnelled into startups, female-led startups returned an average 78 cents in revenue, while male-led startups returned 31 cents.
At the same time, companies with female founders received only 4.4 per cent of venture capital deals, according to PitchBook data.
“There is still a bit of a ‘boys club’ culture, unfortunately, and that is changing as more women start businesses,” Alexander said.
She believes women also face unconscious discrimination, and are more likely to face concerns that they may step away from the business to focus on having children.
However, added Leahy, hope is on the horizon
“The roadblocks and challenges that you come up against, they just make you more determined and more driven and you are more likely to be successful.
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