VC funding for women-led startups declined in 2023: report
Venture Capital (VC) funding for women fell to 9.3% in 2023 from 14.7% in 2021, with female founders in India receiving less than 10% of funding in the year, trailing Europe, and the US, further widening the gender-disparity gap, according to the 2023 annual report of WinPe– a not-for-profit organisation by private equity investors for gender diversity.
Similar data by the World Bank-backed International Finance Corporation (IFC) showed that in emerging markets, only 11% of seed funding goes to startups with women on their founding teams, and the figures are even lower for late-stage funding–underscoring the stark gender gap.
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“All investors say they will back the best idea, but that is influenced by stereotypes and unconscious biases,” said Nupur Garg, founder of WinPe.
Nruthya Madappa, partner at early-stage venture fund 3one4 Capital, said as an industry there is a correction needed in including more women representation in cheque writing roles across early, mid and growth stage/PE funds. Additionally, systematic awareness of and checks for biases that creep into investment evaluation processes are necessary.
Rare examples of women-only founded companies include millet-based ready-to-cook mixes and cereals maker Slurrp Farm
founded by Meghana Narayan and Shauravi Malik, and protein bars maker Yogabar (now owned by ITC) founded by Suhasini Sampath and Anindita Sampath along with Ahana Gautam who set up healthy food brand Open Secret.
Nykaa started by Falguni Nayar is now a listed firm. Edtech unicorn Lead, cosmetics company Sugar, direct-to-consumer product maker Mamaearth, herbs-based condiments and dips maker Wingreen Farms, and The Sleep Company are among firms co-founded by women and their partners.
“Male founders are asked by VCs how fast they can grow their businesses; how much they can grow in one year. Women founders are asked if they’re married, have kids, what their husbands do, what time they go home, other commitments and if they’re “sure” this is not a lifestyle business for them,” Garg added.
According to WinPe, women own only 18-20% of startups in India, while 18-20% unicorns have women as cofounders.
The 2023 dip for women-led startups slipped to single digit at a time venture capital investors pulled back sharply after the record capital inflow of $38.5 billion to Indian startups in 2021.
“Even the 2021 benchmark is quite low (to compare with). Overall representation at the very top of the funnel also lacks vs male founders,” Madappa said, adding her fund – which has backed unicorns like Licious – is tracking this theme consciously. “We aim to allocate at least 20-25% of our new fund towards women-led businesses,” she added.
According to her, as more women graduate from universities with advanced degrees and more women enter the workforce, India has done remarkably well to improve the participation of women.
“This is also translating into more women entrepreneurs and founders, which bodes well for the long-term resilience of the startup sector,” she added.
Growth stage concerns
Multiple women founders and investment executives told ET that the gap in funding for women-led startups is even wider at growth stages.
“That’s one of the key deterrents for women to start up. After the initial cheques, growth stage funding is hard to come by, which is why you see less number of unicorns being headed by women founders,” a growth-stage startup’s founder said.
Open Secrets’ Gautam said she personally hasn’t felt the discrimination. She said in all her board meetings, the conversation was solely on business performance and not coloured by her gender.
“However, broadly, we cannot deny that there is a subconscious bias in people. We need to look no further than the statistic that only 9% of VC funded startups in India are founded by women.
This clearly highlights the bias that is part of our general conditioning that we must consciously move away from,” she added.
“Our experience has shown that women founders have built very successful businesses,” said Kannan Sitaram, partner and cofounder at consumer-focussed VC firm Fireside Ventures.
He said Fireside has invested in Mamaearth, Slurrp Farm, Yoga Bar, Gynoveda, Traya, Sweet Karam Coffee, Fable Street and The Sleep Company, all of which have women founders.
ByTheeconomicstimes
