Great strides made but much room for improvement, say women entrepreneurs

India’s burgeoning start-up ecosystem is an incredible growth story. The sector has amassed a total of $136 billion in total funding and continues to grow at a rapid pace. However, if one were to ask what percentage of these funds were raised by start-ups led by women founders, the answer would be pitiful.

Although the country has seen founders such as Falguni Nayyar of Nykaa, Ghazal Alagh of Mamaearth, Upasna Taku of Mobikwik, Ruchi Kalra of OfBusiness, and Mabel Chacko of Open, who have emerged as trailblazers for women entrepreneurs across the country, India is still lagging behind greatly in this realm.

Despite being the third largest start-up ecosystem with over 100 unicorns, a mere 15 per cent of these billion-dollar enterprises in India have one or more women founders. Furthermore, according to industry estimates, only about 18 per cent of start-ups in the country are led by a female founder.

Funding woes

Aside from factors such as social stigma, gender biases, insufficient capacity building and access to actionable knowledge, a pressing challenge for women entrepreneurs is access to capital, especially equity capital.

“Women have relatively lesser personal wealth than men. This prevents them from being able to amass what is often the biggest prerequisite to becoming an entrepreneur – capital,” said Pearl Agarwal, founder and Managing Director of Eximius Ventures.

“Women often need to create and sustain their enterprises on micro-loans or borrow from people in their social circles. Moreover, the short nature of these loans also compromises their ability to make long-term investments,” Agarwal added.

Amid the ongoing funding winter in the Indian start-up ecosystem where overall funding in the start-up ecosystem dropped 35 per cent year-on-year in 2022, funding among women-led start-ups did not take a big hit.

Women-led start-ups raised $3.9 billion from 251 deals in 2022, a slight decline compared to the $4.3 billion raised across 349 deals in 2021, according to Tracxn, a market intelligence platform. Despite these start-ups comprising 11 per cent of total funding raised in 2022 compared to 8 per cent the previous year, the overall share still remains very low.

While late-stage funding declined across the board, early-stage start-ups led by women saw investments double from $550.5 million in 2021 to $1.1 billion in 2022.

“At an early growth stage, most businesses – not just women-founded businesses – do not have much equity. This is why we need funds like AWE Funds to invest with the gender lens to increase access to this much-needed equity, especially in an environment where less than 2 per cent venture equity is going to women businesses,” said Seema Chaturvedi, Founder and Managing Partner of AWE Funds, a women-focused growth stage venture fund.

Women-led start-up accelerators

To bridge this gap, players like Google and Sequoia, among others, have started accelerator programs for women-led businesses in India.

Google has recently started taking active steps to promote women-led businesses in India. In December last year, the firm pledged $75 million to promote such businesses in the country.

“One-fourth of the $300 million taken from the IDF will be used for supporting start-ups run by women,” Google CEO Sundar Pichai said at the Google For India 2022 event on December 19.

Google launched the $10 billion India Digitisation Fund (IDF) back in 2020 to accelerate India’s digital economy. 

Back in October last year, the tech giant also announced the first cohort of its “Google for Start-ups Accelerator - India Women Founders” programme, in which it selected 20 women-founded/co-founded start-ups with the aim to funnel more capital into such businesses.

Some of the selected start-ups included Aspire for Her, Elda Health, Jumping Minds, MeMeraki, OPOD Audio and PickMyWork, among others.

Sequoia India also recently announced the second cohort of Sequoia Spark Fellowship, a $100,000 equity-free grant and mentorship programme, comprising 12 start-ups.

Sequoia Spark, whose first cohort ended in December 2022, is a year-long programme combining capital and deep, immersive mentorship designed for more women in India and Southeast Asia to become entrepreneurs.

Such programs, industry watchers believe, go a long way in providing women entrepreneurs with much-needed mentorship assistance.

“The primary woe for women founders in India is the sheer lack of a mentorship ecosystem. To truly foster greater women’s participation, we need to create more platforms that allow mutual learning and guidance from stalwarts. This will make the entire road of entrepreneurship less oppressive for women,” said Agarwal.

Governmental support

To foster entrepreneurship among women, the Government of India has also put in place many policies and schemes.

NITI Aayog, in partnership with SIDBI, recently launched the Women Entrepreneurship Platform (WEP) which aims to promote women entrepreneurs nationwide. Aside from offering incubation and acceleration support to women-led start-ups, the Platform will also provide “services such as free credit ratings, mentorship, funding support to women entrepreneurs, apprenticeship and corporate partnerships.”

Since personal wealth is a major deterrent for women, the Bharatiya Mahila Bank Business Loan scheme is another policy specifically aimed to promote women in manufacturing businesses by providing them loans up to Rs 20 crores. Further, if the amount needed is under Rs 1 crore, no collateral is required.

The Dena Shakti Scheme is another that aims to provide loans up to Rs 20 lakhs for women entrepreneurs in agriculture, manufacturing, micro-credit, retail stores, or small enterprises. The scheme also provides a concession of 0.25 per cent on the interest rate.

The way forward

However, there still remains much room for improvement.

“While the government has already released numerous initiatives that aim to make access to credit less laborious for women nationwide, there is still a wide umbrella of sectors where the relief mechanisms for credit access are inadequate. This is specifically true for a bunch of new and exciting sectors like web 3,” added Agarwal of Eximius Ventures.

Aside from promoting easier access to capital, Chaturvedi of AWE Funds says that improving avenues of providing access to actionable knowledge, networks and mentorship opportunities can also help women leapfrog gaps.

“Normalizing gender equity where women are afforded similar opportunities as men is a great start. A significant enabler to this end will be recognizing and then addressing conscious and unconscious biases in a productive way,” she said.