Introduction
India is now the fifth-largest economy globally, with a plan to expand it to a five trillion-dollar economy by 2027. This growth trajectory is driven by robust infrastructure, an evolving digital landscape, and a surge in entrepreneurial activity. A cornerstone of this economic growth is the startup ecosystem, which is flourishing like never before. With over 100 unicorns (startups valued at over $1 billion), India boasts to be the third-largest tech startup ecosystem in the world, following only the U.S. and China.
The country’s vibrant startup landscape is fuelled by innovation across industries such as fintech, e-commerce, health tech, and SaaS (Software as a Service). Not only is it a hub for homegrown entrepreneurs, but it also attracts significant global venture capital investment, cementing its position as a leader in global tech and innovation.
This article explores the state of women-led startups in India, analyses the structural barriers they face in accessing funding, and discusses potential solutions to bridge the gender gap in venture capital.
Current State of Women-Led Startups in India
As per NASSCOM report, out of the 80,000 startups in India in 2022, 18% were founded or led by women. When looking at unicorns, women-led companies accounted for 17% of the 105 unicorns in India in the same year. While these numbers signal an increase in women’s participation in high-growth ventures, the funding landscape tells a more revealing story.
Women entrepreneurs are more prominent in sectors such as e-commerce, edtech, fashion, beauty, and consumer goods, where they have successfully leveraged innovative models to address market needs. However, women are underrepresented in sectors that are capital-intensive, deep-tech, and high-growth. Reports suggest that male founders still dominate sectors where technical expertise is essential, making it more difficult for women to penetrate these industries.
While women strive to foster equity within their startups, the broader entrepreneurial landscape doesn’t always mirror these efforts. Research shows that startups with at least one woman founder tend to be more inclusive, employing 2.5 times more women in senior leadership roles compared to startups founded solely by men. This points to a significant impact women-led businesses have on gender diversity at the leadership level. However, if women and men start working at the same time, seniority doesn’t keep pace for women. After working 10 years in a startup, 8 out of 10 men go on to occupy Director/VP positions, as compared to about 5 in 10 women.
While the numbers are rising, women-led startups face a challenge of funding. In 2022, only 18% of total venture capital funding went to women-led startups. These numbers show that, while women entrepreneurs are making strides in India’s booming startup scene, there is still a long way to go in ensuring equitable funding and support for their businesses.
India’s startup ecosystem continues to grapple with gender disparities. While India hosts over 8,800 startups with women founders that have collectively raised $23.3 billion, only around 2,300 of these startups have secured funding. More than 6000 startups led by women remain unfunded.
The Venture Capital Funding Gap
The gender funding gap refers to the significant disparity in venture capital (VC) investments received by startups founded or led by women compared to those led by men. In India, this gap is stark; despite the growing number of women-led startups, they continue to face systemic challenges in securing venture capital. Female-led startups receive disproportionately lower funding and smaller deal sizes than male-led ventures. Women-led startups saw their peak in venture capital funding in 2021, securing $6.5 billion, but this amount drastically dropped to just $1.1 billion in 2023—a decline of 75%.
Analysis of the two charts comparing VC investments in women and men-led startups in India highlights a persistent gender gap in both deal count and funding amounts. From 2015 to 2020, the investment range for men-led startups remained substantially higher, with even the lowest investments in male-founded ventures surpassing the highest amounts secured by women-led startups. In 2019, women-led startups received about $1.1 billion from 140 deals, while men-led startups attracted roughly $12 billion from over 700 deals, reflecting a tenfold difference in funding. Even though both categories saw peaks in 2019, women-led startups faced steeper declines afterward, with a notable drop in funding in 2020.
The scenario is quite the same across the world. In the US, female entrepreneurs receive only about 2% of all venture funding, despite owning 38% of the businesses in the country.
The image highlights a significant gender gap in venture capital in Europe from 2013 to 2023. Female-founded startups peaked in 2021 with over €1 billion in funding and 600 deals, while male-founded startups received around €90 billion and nearly 10,000 deals in the same year. By 2023, funding declined for both groups, but the disparity persisted. Male-led startups consistently received significantly larger investments, and deal counts than female-led companies, underscoring the ongoing inequality in VC funding.
Numerous studies and reports have consistently highlighted the pervasive gender disparities in venture capital investment across different countries. They reveal significant gaps in both the number of deals and the total funding awarded to women-led startups compared to their male-led counterparts. Such disparities are not confined to a single region but represent a global trend, underscoring the need for further academic inquiry into structural biases within the venture capital ecosystem and the formulation of strategies to mitigate these imbalances.
Structural Challenges in VC Firms
The gender gap in venture capital funding is a critical issue that must be addressed to promote gender equity in entrepreneurship. Women are often underfunded in comparison to their male counterparts, a situation driven by both conscious and unconscious biases embedded in VC firms. These biases, whether unintentional or systemic, discourage women from becoming job creators and innovators.
Multiple studies show significant gender bias in venture capital pitch processes. An experiment was conducted where identical pitches were presented with male and female voiceovers. The results revealed a clear bias: More than 65% of participants chose to fund the pitch with the male voice, while less than 35% backed the female-voiced pitch. This stark disparity suggests that gender stereotypes, rather than the content or merit of the pitch, influence funding decisions. Male entrepreneurs are often perceived as more competent or capable, leading to an inherent bias in the investment process.
In a study analysing Q&A interactions between 140 venture capitalists and 189 entrepreneurs in New York, researchers found a distinct gender bias in the questions asked. VCs typically asked men about the potential for gains and growth, while women were questioned more about risks and potential losses. This bias was evident not only in male VCs but also in female investors. The difference in questioning reflects how gendered perceptions can skew the evaluation process, putting women entrepreneurs in a disadvantaged place by framing them in a more cautious or negative light.
The difference in questioning has significant funding implications for startups. The same study showed that entrepreneurs who received mostly prevention-focused questions – around risks and potential losses – raised an average of $2.3 million by 2017. In contrast, those asked promotion-focused questions – highlighting growth and potential gains – raised an average of $16.8 million. This stark disparity, nearly sevenfold, demonstrates how the framing of questions can shape investor perceptions and lead to vastly different funding outcomes for startups, further contributing to the gender funding gap in venture capital.
The picture is no different in India’s case. WinPe Founder and private equity investor Nupur Garg said, “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”.
Ghazal Alagh, founder of a beauty and personal care brand, recounted her experience of facing scepticism from investors when raising her initial round of funding. When her husband joined her as a co-founder, the investors started questioning the company’s stability in the event of a personal split—a concern rarely directed at male founders. Similarly, Vineeta Singh, founder of cosmetics brand, disclosed that she concealed her pregnancy during investor meetings, fearing it would jeopardise her chances of securing funding. Their experiences highlight the persistent gender bias in venture capital, underscoring the need for systemic changes to foster an inclusive entrepreneurial environment.
Addressing these biases requires greater gender diversity among investors, more standardised assessment frameworks for evaluating ventures, and awareness initiatives to challenge unconscious biases within VC firms.
Efforts to Bridge the Gap: Government and Private Initiatives
In an effort to combat the gender funding gap in India, several key initiatives have been launched. Stand-Up India offers financial support to women entrepreneurs in the form of loans, focusing on those from underrepresented communities. Meanwhile, NITI Aayog’s Women Entrepreneurship Platform provides a comprehensive ecosystem that includes mentorship, networking opportunities, and access to funding sources, fostering a supportive environment for women-led startups.
Private sector initiatives are also gaining momentum. Saha Fund, a venture capital firm, focuses on investing in women-led startups, while accelerators like SheEO provide funding and support exclusively for female entrepreneurs. Additionally, organisations like FICCI FLO (the women’s wing of the Federation of Indian Chambers of Commerce and Industry) aim to promote women’s participation in business through networking and advocacy.
International best practices can further inspire gender-inclusive VC funding in India. Countries like Canada have established the Women Entrepreneurship Strategy, which aims to double the number of women-owned businesses by providing funding, mentorship, and resources. The UK’s Rose Review has proposed measures to increase female entrepreneurship by improving access to capital and encouraging investment in women-led firms.
To address the gender bias prevalent in venture capital funding, it is crucial to reform the investment process by concealing the identity of startup founders during the initial screening phase. This approach would allow investors to evaluate business proposals based solely on their merits, rather than being influenced by gender or other personal characteristics. By implementing blind assessments, venture capital firms can create a more equitable environment that minimises biases and encourages diverse talent to thrive. Such changes could lead to increased funding for women-led startups, ultimately fostering a more inclusive entrepreneurial ecosystem.
India must critically assess its startup and VC ecosystem, identifying and addressing structural biases that impact women founders. A deeper understanding of these dynamics will be essential to developing effective, evidence-based solutions that foster greater inclusivity and gender parity in entrepreneurial funding.
