Crowdfunding provides a much-needed opportunity for women and minority-owned startup founders, who have been almost entirely excluded from traditional venture capital (VC) funding. Despite the venture capital world's promises of inclusion, a massive diversity issue still exists, and the numbers speak for themselves.
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According to a 2020 yearly diversity spotlight by Crunchbase, only 2.6% of VC funding went to black and Latinx founders from 2015 to 2020, with a mere 0.2% increase in underrepresented minorities being funded by VC during this period. Only 4% of VC funding went to women-led startups, even though the numbers were slightly better when paired with a white male co-founder. But this kind of improvement defeats the purpose of diversity and inclusion.
Fortunately, the passing of the Jumpstart Our Business Startups (JOBS) Act, which went into effect in late 2015, paved the way for crowdfunding, allowing anyone — not just the wealthy — to invest in startups. With crowdfunding, women and minority entrepreneurs now have access to the capital they need to get their businesses off the ground.
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The impact of this shift could be enormous, particularly for minority communities that have long been excluded from traditional funding sources. Equity crowdfunding platforms like StartEngine and Republic report underrepresented founders are taking advantage of this new avenue for raising capital. In fact, 27% of offerings on StartEngine had a female founder or co-founder, and 33% had a minority founder. On Republic, 25% of founders who raised funds were from underrepresented minorities, and an impressive 44% of all funds raised in 2017 went to female founders.
Equity crowdfunding may still be in its early stages, but its impact could be far-reaching. The fact remains that good ideas are universal, but opportunity is not. It's a frustrating reality for entrepreneurs who don't fit the mold, but there are people in the industry working to change it.
In an effort to promote supplier diversity and support underrepresented groups, The Coca-Cola Co. has partnered with Rise Up Crowdfunding LLC to launch a new equity crowdfunding portal. Rise Up Crowdfunding empowers investors from the general public to invest in women and minority-owned small companies and startups looking to raise capital. This funding portal offers a new solution for business owners to gain access to a process for raising capital from the crowd, which could help them gain a supplier diversity contract.
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Coca-Cola's commitment to supplier diversity aims to maximize procurement opportunities and build partnerships with diverse suppliers. Fernando Hernandez, senior director of supplier diversity at Coca-Cola, said, "This much-needed resource can, in many cases, help small businesses scale up or expand their operations, open new locations and grow their brands."
Ruth E. Hedges, CEO of Rise Up Crowdfunding LLC, added, "We are excited to be working with The Coca-Cola Co. in this venture to make the change we all want to see in the world finally happen."
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