There is a stark investment imbalance between companies led by men and women in India.
In 2021, startups founded by women received only 0.3% of India’s total venture capital funding, according to data by DealStreetAsia. This is despite delivering better results than companies founded by men.
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What’s worse is that women-led firms are also receiving funds—or whatever little—at lower valuations. Only 15% of Indian unicorns have at least one female founder, with Nykaa (pdf) being the only one to be solely run by a woman, according to Nikkei Asia report today (Dec. 12).
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The gender-based funding gap has been around for a while
Since women, in general, have relatively lesser personal wealth in India and across the world, only a few end up becoming company partners, venture capitalists, angel investors, or serial entrepreneurs in the first place.
“…many female entrepreneurs rely on their own savings, loans from family and friends, or micro-loans to finance their business needs. However, the small size and short-term nature of micro-loans do not allow women borrowers to make long-term investments in their businesses,” the World Bank said in its Female Entrepreneurship Resource Point report.
In the US, companies with only female founders garnered only 2% of the $330 billion invested by venture capitalists in 2021. This was the lowest since 2016, according to PitchBook. Hybrid teams did better, at 15.6%. India-specific data is not yet available.
The problem isn’t just that, though.
Women are also expected to display “certain feminine behaviors such as warmth, emotional expressiveness, and sensitivity,” according to a research report by UBS in 2021. However, this often backfires during a pitch to venture capitalists, the report said.
Besides, lesser funding also often leads to more exits from the business at the end of the day.
There have been recent efforts by companies like Google and some global investors to encourage female founders. For instance, Sequoia Capital launched the Spark Fellowship in 2021 in India and Southeast Asia which offers a grant of $100,000 each to 15 entrepreneurs and mentorship over a 12-month period.
A lot more, however, may need to be done in terms of encouragement, for women’s participation in businesses could only benefit everyone in the game.
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