A new beginning

Startups are showing the way in gender diversity

Outside of the agriculture sector, a sizeable share of women in India are self-employed in the informal sector. The work tends to be in small-scale businesses, focused on sectors like retail and services. This is despite the dismally low female labour force participation rate. While the overall employment condition for women leaves a lot to be desired, there also seems to be a silver lining. Female entrepreneurship is on the rise in India. According to the recently released “Women in India’s Startup Ecosystem Report 2023”, the share of women-led startups increased from 10 per cent in 2017 to 18 per cent in 2022. In terms of generating employment, the study finds startups to be more gender-inclusive than the formal sector in general. For instance, the share of female employees in corporations is only 19 per cent, while the corresponding share in startups is 35 per cent. Startups with a woman founder also tend to have 2.5 times more women in senior roles compared with startups with men-only founders. Not only are startups hiring more women, but they are also able to attract the talented lot, who are engaging with the prospects of faster career progression, merit-based roles, high autonomy, and financial independence. The study also finds that startups display lower barriers for women to occupy different roles within the organisation.

Encouragingly, studies have shown that startups founded or co-founded by women do well in terms of generating revenue and creating jobs, and tend to be more gender-inclusive. Female leadership is particularly successful in creating a positive organisation culture. At the workplace, women are also more likely to introduce policies that are conducive to greater female participation. These include flexible workdays, flexible work hours, equity in compensation, and post-maternity return-to-work programmes. However, despite many of these positive factors, even the startup world is not an easy place for women to navigate. Unequal access to capital remains a key barrier. It has been noted that women’s proposals during funding meetings are more likely to be rejected by investors, and they are often treated differently from their male counterparts. Further, most small enterprises in the country are either self-financed or financed with family support — both options more difficult for women entrepreneurs. Besides, poor access to professional communities and networks affects the flow of information, both in terms of funding and market conditions.

Clearly, there is a huge potential among women waiting to be tapped. What is needed is equal access to entrepreneurship opportunities. It would certainly help if established business leaders and firms supported creating more women-focused networking opportunities where women could meet senior business people and find mentors. Women's representation in corporate India is also increasing, though it still has a long way to go. Securities and Exchange Board of India has mandated gender diversity. India’s top 1,000 listed companies by market capitalisation are expected to have at least one woman independent director. However, it is in the interest of firms to have diversity, not only at the top but across the board. At a broader level, India needs to address both social and institutional barriers to tap its women labour force. It will not only help firms perform better but also push up overall economic growth.