Why Must We Invest in Indian Female Founders?
When you flip through a magazine that boasts of 30 top entrepreneurs under 30, you are likely to find faces of men staring back at you. However, despite what we see, we must realize that entrepreneurship is indeed gender-neutral, and since access to capital is not, the society tends to associate only men with business. Investing in Indian women entrepreneurs is not only needed to empower more women, but women also need to actively participate in India’s growth story to create a more sustainable economy. As per the venture debt and lending platform, Innoven Capital — funded startups with at least one female co-founder dropped from 17% in 2018 to 12% in 2019. To make matters worse, as per research conducted by early-stage venture fund and seed accelerator 500 Startups, female entrepreneurs are worried that the economic fallout of Covid-19 might affect them more than male entrepreneurs.
These numbers point out the reality of gender discrimination women have to battle with while making their way in the startup world. Investors tend to overlook and undermine the proven potential women bring to the startup table. Reflecting on how investing in women led startups might even be a safer bet than pooling in male-run ventures, Gloria Kolb, CEO and co-founder of Elidah says, “Women are more conservative and don’t overstate projections. When we pitch investors, we are often pitching realistic numbers. But men so often overstate and exaggerate that investors often discount the numbers off the bat.”
Thus, it is the need of the hour to invest in women founders, and to do that we first must understand and eradicate all the drawbacks women leaders are forced to face when compared to their male counterparts.
What is holding female entrepreneurs back?
Let’s not mince words. India is difficult for female entrepreneurship. It has been established that in India, female business owners (female professionals, in general) have to deal with cultural biases, lack of resources (capital, training) and a host of issues that hold them back from exploring their true potential. Some of them are elucidated as follows:-
- Indian billionaire entrepreneur Kiran Mazumdar-Shaw stated that potential investors considered her to be “high-risk” for wanting to raise funds for her biotech company, Biocon. Due to this attitude, they have a harder time securing funding and getting the necessary support to set up their businesses.
- Experienced women entrepreneurs state that being a woman founder is difficult due to unconscious gender bias. Anyone living in India would be familiar with the common stereotypes associated with women: the need to be passive, submissive, tied to marriage and family, incompetent in the business world. Sexist stereotypes create obstacles for women looking to raise funding, set up businesses or lead their employees. Additionally, women are far less likely to receive support from their families, since they are expected to prioritize family and childcare over any professional aspirations.
- “Bro culture” in Indian startups is an open secret. Obviously, this alienates women by making them feel unsafe and disrespected, especially when it comes to networking opportunities. Consequently, women are unable to create the connections and establish professional relationships that are required for business success.
To counter the aforementioned unfair treatment meted out to businesswomen, and further balance the weights for them to have an equal chance of entrepreneurial success, our investors must concentrate on the empowering aspects of female leadership roles.
Why investors need to support female founders in India?
- Women make more money
Boston Consulting Group partnered with MassChallenge to examine 350 companies. The study found that investments in companies founded or cofounded by women ($935,000) were less than half the average ($2.1 million) invested in companies founded by men. Despite this, women-founded startups generated 10% more in cumulative revenue over five years: $730,000 (women) > $662,000 (men). The Ewing Marion Kauffman Foundation also concluded that women-led teams drew 35% higher return on investment than all-male teams.
The numbers don’t lie: female founders indeed make more money.
- Women repay more reliably
Women struggle for equal access to loans from banks and also report a higher rate of interest on the loan amount. Despite this, the average profit margin for SME loans to women is 15% higher than for loans given to men. Female-owned businesses are about 30–50% lower in terms of non-performing loans than male-owned businesses. Additionally, women generally raise loans to fund revenue-generating businesses, rather than for the other discretionary reasons that men are known to lean towards.
- Women are not motivated by money
Despite popular belief, entrepreneurship is not a “get rich quick” scheme. On average, entrepreneurs work longer, are more stressed, and earn 35% less over ten years than those working for someone else. The most successful entrepreneurs don’t prioritize money, but see it as a byproduct. They seek to create something and make an impact upon the world — which strengthens their resolve to work harder and longer.
However, research from Illuminate Ventures reveals that 15% of male entrepreneurs start companies with financial gain as the main motivation. Comparatively, only 2% of female entrepreneurs do the same. This difference should be highly considered by investors when they are looking at funding female founders and female-led startups.
- Women founders make excellent bosses
According to Saroja Yeramilli, CEO and Founder of Melorra, “Women-led organisations tend to grow more and have happier employees. Studies have shown that women tend to be more compassionate as leaders and are more communal in any group of people.” An empathetic workplace naturally works out better for employees and employers alike — happy workers are more engaged and more productive and the more productive the employees, the more they will contribute to company success.
- Women are likely to prioritize corporate social responsibility
Research by Kellie McElhaney, the founder of the Center for Gender Equity & Leadership at the University of California at Berkeley’s Haas School of Business, reveals that companies with women on their corporate boards place greater focus on social, environmental, and governance issues. Similarly, a survey of 30,000 consumers in 60 countries revealed that 66% of consumers are ready to pay more for products from brands invested in social commitment. This tendency has a direct effect on business.
Women bring tangible, long-term value to the entrepreneurship table. Investors have gradually begun to recognize this, and women-led startups are taking centre stage. In 2019, more female-founded unicorns were born than ever before. Hence, within India, the trend needs to be established and solidified by investors who encourage female founders with funding and opportunities.
Through women-only networking groups like Leap.club we are heralding an age of gender parity in every workplace. Having discovered that only two-thirds of managers are men, the team at Leap.club is striving to increase the likelihood of women being promoted to managerial positions. Similarly, through initiatives hosted by global diversity-focused incubator, Encubay, the ecosystem of startups is shifting from one that is gender biased to one that is neutral “irrespective of gender, academic backgrounds or any other acquired privileges.” If we were to increase women’s labor force participation by only 10%, we could add $770 billion to India’s GDP by 2025. Investing in women founders is key in adding this value not just to the founders’ lives, but to the national wealth itself.
As a part of the freelance writing industry, I’ve experienced the hardships of fellow women colleagues on a personal front. Not only are we advised to get a stable job in the engineering or medical sector, but we’re also not taken seriously by our own clients — who often ask to be put in touch with senior men to do the accounts for us. Hearing time-worn excuses to work for free in return for “experience” and “opportunity” is another tell-tale sign of assuming that women do not need to earn their own bread and butter. However, the truth is we do, we want to, and we will — not only for ourselves — but also for thousands of others.
Written by Shreya Bose. Edited by Aradhita Saraf.
Eximius Ventures is a micro venture capital fund investing in young and dynamic Indian Entrepreneurs with a precedence for female founders. You can reach out to us at pitches@eximiusvc.com.
