What’s Holding Back Women Entrepreneurs In Tech?

Although the number of women-founded startups is on the rise since 2010, investors are still skeptical about investing in women tech entrepreneurs. Recent studies show that women leaders eager to run startups are still struggling with challenges unique to their gender.

Highlighting some of the major barriers and disparities that need immediate attention, a recent report by MAKERS’ titled, ‘State of Women in Tech Entrepreneurship in India’, suggests that of the 2,460 investors who participated in total startup funding activity in India in the period from January 2018 to June 2020, only 22% or 540 investors, invested in startups led by at least one woman founder.

We have identified four key takeaways from the report.

Investment Diversity Gap in Indian startups

Women-founded and co-founded startups account for less than 6% of total investments infused into the Indian startup ecosystem, reveals the report. The funding raised by Indian startups with at least one woman founder accounted for just 5.77% or $1.69 billion (across 378 deals) of the total startup investments in India between January 2018 and June 2020.

One of the biggest reasons, suggests the report, is the skepticism about women entrepreneurs in the tech ecosystem. Of the 2,460 investors who participated in startup funding during the Jan 2018-June 2020 period, only 22% (540) invested in startups led by at least one woman founder.

While women entrepreneurs in tech receive support and visibility at an early stage, support for growth and scaling is dependent on market sentiment and volatility. The numbers speak for themselves: In H1 2020, the early-stage funding deals for startups led by at least one woman founder increased by 8.16%, while growth-stage deals reduced by 54%.

Impact of Covid-19 pandemic

In times of the Covid-19 pandemic, several women-led startups scaled down their operations to stay afloat. Several women also turned to home chefs and started a business, while some in the apparel industry adapted to the situation, and instead began to manufacture protective face masks and PPE kits.

Despite the effort, in the first half of 2020, funding for women-founded and co-founded startups fell by 24% to $280 million, compared to $369 million in the first half of 2019. –In fact, the funding has declined across all three stages – early, growth, and late — in H1 2020, compared to H1 2019. Notably, edtech segment received the highest quantum of funding at $94.3 million over eight deals, followed by fintech at $42.9 million in eight deals.

Rise in the number of women-led startups

There are approximately 297 women tech entrepreneurs running 285 tech startups in India now – a major rise from just 26 startups in 2010. Yet, women-only-founded startups account for just 22.5% of the total 285 startups that have at least one woman founder.

In a sector-wise analysis, women tech entrepreneurs were found to have the highest presence in the fintech and financial services sector, with at least 26% of women-led startups in this space. Next comes e-commerce, which has found favor among women tech founders with 20%, followed by edtech at 18%, and health tech at 16%.

Investors skeptical about investing in women tech entrepreneurs

Of the 2,460 investors who participated in the startup funding activity in India from January 2018 to June 2020, only 22% (or 540 investors) invested in startups led by at least one woman founder. When it comes to the total number of disclosed funding deals in women-founded startups, Omidyar Network is the leader with at least 15 deals in women-founded or co-founded startups, followed by Sequoia Capital with at least 12, and SAIF Partners with at least nine, between January 2018 and June 2020.

Ways to boost women tech entrepreneurs

While we are aware that there’s nothing inherently masculine about technologies such as cloud computing, data analytics or artificial intelligence (AI) and computers are also androgynous by nature, the tech sector remains heavily dominated by men. Perhaps that explains  why 30.8% of women entrepreneurs believe that the main reason for not being able to raise funding or scale up is the inherent mindset that reflects a patriarchal society, which does not take women seriously in leadership positions.

Besides, there is a lack of networks and forums that can support women entrepreneurs and allow dialogues. The report too suggests that it is important for women to have the right allies that steer their growth as entrepreneurs.

There is also a need for greater access to capital and undeterred confidence in their own abilities to tackle challenges and move ahead in their journeys.

And for that it is important to increase the ratio of women in leadership roles. The more the women leaders in the startup ecosystem, the more it will encourage other women to follow their footsteps.

The report also observed that more experienced women need to start mentoring other women entrepreneurs, especially at the early stage.

There should be more emphasis on open platforms for fundraising that can promote transparency and reduce chances of gender bias in the ecosystem.

Finally, the need of the hour is to create open, mindful practices to empower and enable women tech entrepreneurs to thrive and bring greater value to the table.