Even before the new JOBS Act Title III rules were enacted in May 2016, crowdfunding has been an empowering form of investment that has already changed the world in many ways. Now with these new laws in place, the crowdfunding landscape is in for even more change. The current rules will enable start-ups to raise up to $1 million online from accredited investors and, for the first time, retail investors. In turn, these investors will receive equity securities via SEC-registered crowdfunding portals. These changes to the JOBS Act have the potential to help women and minority entrepreneurs gain new access to venture capital and wealth creation.

As a black entrepreneur, Yemani Mason, the founder of real estate crowdfunding platform VestMunity has experienced the challenges minorities face in accessing capital and support for their ventures. He believes the growth of crowdfunding will level the playing field for entrepreneurs. (For more on Title III, see: Crowdfunding Rule Lets Anyone Invest in Startups.)

Like countless minority entrepreneurs, Mason secured crucial funding for his business via crowdfunding. In fact, equity crowdfunding is projected to surpass venture capital as the leading source of start-up funding reaching a projected $36 billion by 2020 versus venture capital funding and angel investor funding at around $30 billion and $20 billion per year, respectively.

An un-level playing field

The capital disparity between minority and non-minority businesses is clearly illustrated in published data from the Minority Business Development Agency. The report found minority firms were less likely to receive loans, and more likely to be denied. Additionally, they paid higher interest rates on the loans received.

Similarly, other reports highlight the female funding gaps including lesser approvals for business loans. The National Women’s Business Council’s says that for every nine men raising equity financing to start and scale their businesses, only one woman does. In short, the traditional funding roads have been male-centric. So how will the ability for private businesses to raise money online from retail investors for the first time, and the non-accredited investors' corresponding new access, help level this playing field? (Learn more, here: Guide to Crowdfunded Investments for Non-Accredited Investors.)

Below are three ways crowdfunding is now making entrepreneurship more accessible than ever.

1. Enhanced community building and program access

Crowdfunding is well-known for its ability to acquire and nurture a community of supporters, as a key benefit during and after campaigns.

Could it also enhance one's ability to tap existing enterprise and government programs including those targeting financial inclusiveness?

Yemani Mason, the founder of VestMunit's entrepreneurship story, provides one answer: "I began building my business the same way that many tech startup founders do—spending hundreds of hours blueprinting, coding, testing and debugging the VestMunity platform. As costs mounted, I found it increasingly difficult to both finish building the platform while also building a business."

"My biggest challenge was access to business development resources. As a minority entrepreneur, raising capital and establishing connections within the larger funding community was extremely difficult. I simply didn’t have access to the resources and networks I knew I would need to grow my business beyond a successful product launch," adds Mason.

Fortunately, Mason tapped other forces also at work to expand financial access and build more inclusive communities. Mason’s passion and plan to enable other Florida entrepreneurs to finance fix and flips won him $10,000 in seed funding at the Miami Fintech Forum, an event in the Inclusive Enterprise Series, a new program backed by Citi Community Development and Village Capital.

Another initiative harnessing crowdfunding to support women is Plum Alley. Plum Alley Investment’s approach brings valuable guidance to navigate the male-centric funding system as well as institutional co-investment to fuel female founders and tap the estimated $500 billion in female capital on the sidelines.

2. Better Access to Backers and Investors

Circle Up, for consumer goods equity crowdfunding and Kickstarter, for rewards and pre-order crowdfunding have published data extolling the success of women accessing funding online at a rate exceeding men. Minority campaigners like Brenda Beener of Seasoned Vegan restaurant in Harlem have successfully raised capital on Kickstarter, in her case $22,000.

Yet, the investor base for the former is limited to accredited investors, and the average raise on the latter is less than $10,000. Plus the rewards model works much better for some sectors like creative ventures.

Georgia Quinn, CEO of iDisclose, sees a light on the horizon though with Title III. “Title III opens up financing opportunities for many types of businesses that have traditionally been denied other means of capital. Traditional funding sources have a race and gender profile that looks like themselves,” says Quinn.

3. New Wealth Building Opportunities Made Accessible

Through his crowdfunding platform VestMunity, Mason is generating new wealth building opportunities by creating high-yield real estate secured returns for rehabilitated distressed properties.

"Rehabilitating and reselling homes can provide local investors with wealth-building opportunities. The average person has very limited access to the information and resources they need to safely pursue these types of investments. I wanted to create a platform that connects everyday people to accessible investment opportunities," said Mason.

Mason’s success in building wealth and financial inclusion for his VestMunity customers and himself will be a direct byproduct of his demonstrated ability to bridge the funding gap to scale his own business.   

The Bottom Line

Financial inclusiveness for women and minorities will not happen overnight; nevertheless, crowdfunding, with Title III as the catalyst, is helping to close the funding gap by enhancing community building and program access, providing better access to investors and access to new investment types. Crowdfunding may yet level the playing field by enabling underserved groups when traditional funders will not.

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