Herd Behavior on Online Platforms: Gender Differences in the Context of Crowdinvesting

A recently published study in Venture Capital: An International Journal of Entrepreneurial Finance, authored by ECDF board member Timm Teubner and his former ECDF doctoral student Dr. Florence Jaouat, examines whether the gender of the first investor in a crowdfunding campaign influences the campaign’s subsequent trajectory. The study, titled "Funding (doesn‘t) follow females? An empirical study on the role of gender and role congruity in equity crowdfunding," reveals that the gender of the initial investor can indeed play a role. Also, visible profile features, such as expert badges and profile images, elicit different reactions from the crowd depending on whether they appear on the profiles of women or men. 

In crowdinvesting, a large number of private individuals collectively fund start-ups via online platforms, typically by investing smaller amounts. It is often publicly visible who has already invested in a campaign, allowing potential new investors to use the decisions of others as a guide. Previous research on gender differences in crowdinvesting has primarily focused on the gender of the entrepreneurs seeking capital. In contrast, this study shifts the focus to the investors themselves. The authors analyzed approximately 70,000 investments across more than 100 campaigns on a European crowdinvesting platform between 2012 and 2019. For each investment, the user’s name was visible, which allowed for the determination of their gender. Some users also displayed a profile photo and particularly active users were additionally identified by a badge. The study examined the amount of additional capital contributed to a campaign by subsequent investors, as well as the gender of those subsequent investors.

Investments made by women were, on average, followed by less subsequent capital than those made by men. At the same time, other female investors were slightly more likely to join in. This disparity is particularly evident regarding the expert badge: for men, such a badge was associated with more follow-on capital, whereas for women, it was associated with less. Conversely, when female investors displayed a profile photo, this disadvantage disappeared. One possible explanation is provided by role congruity theory: individuals are evaluated more positively when they conform to gender-stereotypical expectations, for instance, women being perceived as trustworthy and men as competent financial experts. Accordingly, an expert badge aligns more closely with the stereotypical image of men, while a profile photo can help convey trustworthiness in the case of women. Although the differences are small, they appear consistently. Since the study is based on observational data, it reveals correlations but does not allow for causal conclusions.

The study’s findings are relevant well beyond the realm of crowdinvesting. Through their design, digital platforms determine what information about their users is made visible. This visibility can foster trust and enable individuals to learn from the decisions of others; however, it can also lead to users being judged based on gender stereotypes. Platform operators should therefore critically examine design elements, such as badges, profile pictures and default settings in user profiles, with a key question in mind: do these elements have the same impact across different user groups?

Access the publication //here.