Why So Little Racial and Ethnic Diversity in Crowdfunding?

October 2012; Source: Momentum

Tides Foundation Program Director Anthony Jewett raises an interesting question about crowdfunding: “Where’s the color in the crowd?” He acknowledges many crowdfunding success stories in an industry that he says will generate $2.8 billion in funding for start-up and small enterprises this year (nearly double what it generated last year) and he argues that crowdfunding has “more serious potential to democratize access to capital across the for-profit, nonprofit and political arenas over the long term.” But he is troubled by the lack of people of color in the crowdfunding industry, which is dominated by leaders looking much like the venture capital and private equity industries in terms of ethnic and racial diversity—which isn’t much.

Jewett suggests that mutual aid societies in African, Latino, and Caribbean cultures have been key to the economic advancement of those groups for centuries, but that’s not quite the same as modern crowdfunding, which he describes as “a more technologically efficient iteration of these older fundraising strategies that isn’t limited by geographic proximity…with the advent of social media and online payment technologies…dramatically widen[ing] the pool of potential contributors, lower[ing] transaction costs, enabl[ing] larger sums of money to be raised in shorter periods of time across vast distances, and even provid[ing] a reward or return in exchange for the investment.”

He contends, “most small enterprises and business leaders in communities of color still don’t even know that crowdfunding exists or how it works. The clock’s ticking and the ball is in our court. Let’s get in the game.” Is his argument that ethnic and racial communities can better mobilize the capital they control through the advanced technologies of crowdfunding or that the crowdfunding industry can be more attentive and more inclusive to racial/ethnic causes, issues, and needs?—Rick Cohen