The Great Debate

It’s an old, and at this point weary, tale that women entrepreneurs receive far less venture capital than men. Women currently own 46 percent of all American small businesses, generate $1.3 trillion in revenue and employ 7.7 million people. Yet Dow Jones Venture Source says that of the U.S.-based companies that received a round of venture capital financing in 2010, roughly 6 percent had a female CEO and 7 percent had a female founder.

Against this backdrop, it is interesting to look at a new crowdfunding law that was passed as a provision of the JOBS Act in April. The law, which will be effective in early 2013, is an exemption to existing securities law that for nearly a century has enabled only wealthy individuals or banks to offer entrepreneurial capital. Kevin Lawton argues against the arcane securities law in his book, The Crowdfunding Revolution, saying that it stymies the democratization of investing.

The crowdfunding law frees entrepreneurs to accept capital from “the crowd.” Under the new law, people who earn less than $100,000 in annual income may invest up to $2,000, or 5 percent of their income (whichever is greater), in businesses of their choosing via approved intermediaries. People who earn more than $100,000 can invest up to 10 percent of their income.

The power of the crowd has demonstrably attracted women already. I recently polled the three preeminent crowdfunding websites: Kickstarter, Crowdrise and Indiegogo, to find out how many women-led projects their sites host. Crowdrise, a platform that raises money exclusively for charities, estimates that about half of its users are women. Kickstarter told me they don’t have the information. Indiegogo had more to say, pointing out that in 2010, 42 percent of its successfully funded ventures were led by women.

These online platforms offer “gifts” in return for their investments – things like, at Kickstarter, “a copy of what’s being made, a limited edition or a custom experience”. Investors under the new crowdfunding law will actually receive equity in the businesses they support.

Bogota, Colombia – Although the phone rings incessantly, Carlos Moreno is not distracted. He continues to talk, not just about his life as a slightly graying 78-year-old pastor but also about how he became what some consider to be the world’s first microfinance recipient. It wasn’t as an entrepreneur.

“My life is dedicated to the Lord,” he says. Although Carlos had launched a tea and spice business in the early 1970s, he hadn’t aspired to be an entrepreneur. That is the case with most microfinance recipients. Yet the movement that extends small, uncollateralized loans to the poor to start businesses has marketed itself as being about entrepreneurship. That is a mistake. While microfinance may have helped Carlos start a business, it did not make him an entrepreneur.

Carlos’s dream was to build a Protestant ministry. To get there, he took out a loan in 1971 from the Institute for International Development Inc (IIDI), the precursor to Opportunity International, a Chicago-based microfinance institution. That transaction appears to be the first loan in modern microfinance history, though as Center for Global Development Senior Fellow David Roodman notes, “people have been making small loans to help the poor for 500 years.”

Amid jitters about uncertainty in the financial markets over the past 16 months, many investors have continued to look toward the BRIC countries -- Brazil, Russia, India and China, which by 2050 are expected to be wealthier than most current major economic powers.

In all four countries, GDP has more than doubled since 1998, and in China and India it has trebled.

The Confederation of Indian Industry, a non-profit non-governmental, industry-led organisation, estimates India's GDP growth rate at 6.1 per cent in 2009-10.