Indian startup ecosystem: Why more women entrepreneurs are needed

Despite being the world's third-largest startup hub, India shows a dishearteningly low percentage of startups led by women

The burgeoning Indian startup ecosystem has an incredible growth story, becoming the world’s third-largest startup ecosystem over the last decade. However, if one were to ask what percentage of these startups were led by women founders, the answer would be pitiful.

Although the country has seen entrepreneurs such as Falguni Nayyar of Nykaa, Ghazal Alagh of Mamaearth, Upasna Taku of Mobikwik, and Vani Kola of Kalaari Capital, who have emerged as trailblazers for women entrepreneurs across the country, India is still lagging behind greatly in this realm.

The percentage of women-owned companies in the country has increased from 14 per cent to 20 per cent over the last decade, according to industry estimates. Yet, much progress is yet to be made.

Women entrepreneurs continue to face several hurdles. 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.

“The gender gap in venture capital circles and cultural stereotypes create a scenario where female business founders find it significantly more challenging to secure loans or capital compared to their male counterparts,” said Yamini Bhat, co-founder and chief executive officer, Vymo, a sales engagement startup.

In line with the ongoing funding winter, investments among women-led startups fell 75 per cent to $1.1 billion across 246 rounds in 2023, compared to $4.4 billion across 494 rounds in 2022. These startups had raised $2.9 billion across 474 rounds in 2020, according to data from Tracxn – a market intelligence platform.

“I would also say there is investor prejudice toward women entrepreneurs. At least a couple of venture capitalists have enquired about the number of children I have and their ages - something that does not come up with men seeking funding,” said Meera Iyer, chief executive officer and co-founder, SkinQ – a personalised skincare startup.

However, dedicated women entrepreneurship-focused venture capitalists like StrongHer Capital, SheCapital are attempting to bridge this funding gap.

Moreover, startup accelerator programs from companies like Google are also going a long way in this regard.

The technology giant recently announced that it was backing women-led startups that are using artificial intelligence (AI) technology in their innovations ranging from making electricity distribution smart and managing building operations autonomously to enabling organ transplantation, through its Google for Startups Accelerator (GFSA) Program for women founders.

GFSA is a three-month programme that includes mentorship, workshops, and access to resources and networks for startups from across all sectors.

“The right mentoring and support can really provide leverage to a woman entrepreneur. So greater access to these kinds of forums and platforms can not only help in creating a larger pool of women entrepreneurs but also foster an innovation mindset in the startups that they lead,” said Bhat.

The Government of India, various state governments, nationalised banks, and private sector entities have also been focused on assisting women entrepreneurs across various segments.

NITI Aayog, in partnership with Small Industries Development Bank of India (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 startups, the Platform also provides “services such as free credit ratings, mentorship, funding support to women entrepreneurs, apprenticeship and corporate partnerships.”

Additionally, the Stand Up India Scheme aims to promote entrepreneurship among women by providing bank loans to start new businesses. The Pradhan Mantri Mudra Yojana is another key scheme that has provided crucial financial support to millions of women entrepreneurs.

“The government push to women in business through schemes like Annapurna, Mahila Udyam Nidhi are milestones to encourage participation of women in business,” said Iyer.

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

Although much progress has been made, industry insiders say that the way forward would entail the proper implementation of gender-inclusive policies in a way that provides women entrepreneurs a level playing field.

“There are newer ways in which biases are manifesting as technology evolves: be it algorithmic bias, or digital gender pay gap, or gender bias in virtual environments. So it becomes important to have a sustained focus on diversity and inclusion to be able to mitigate bias,” said Bhat.