Why it makes sense to invest in startups led by women

While a large number of social constructs ranging from family reasons, early marriages to a lifelong aversion to girls’ education contribute to gender inequality, a lack of support, infrastructure and opportunities makes it difficult. for women to enter the formal labor market.

As a result, the representation of women in entrepreneurship is dismal. However, investors are gradually realizing the potential to invest in women-led start-ups for a variety of reasons, including their operational efficiency and the large market opportunity that women understand better.

“It makes sense to invest in women,” says Naiyya Saggi, founder of online parenting platform BabyChakra. “The opportunity belongs to women because they are the next wave of consumers. Also, it makes all the more sense to invest in women who solve for women because they better understand the consumer journey. Therefore, you need the creators of the new economy. coming from the people you hear are new economy consumers, ”she adds.

Also read: MPW: Why women remain a minority in the startup ecosystem in India

Indeed, globally, investments in businesses with a female founder / co-founder averaged $ 935,000, less than half the average of $ 2.1 million that businesses led by men attracted, according to a 2018 study by the Boston Consulting Group and MassChallenge, an American company. global network of accelerators.

Ironically, the same study also found that startups founded or co-founded by women generated 10% more cumulative income over a five-year period.

“In the start-up world, there is a biased view against women. They believe that they are operating at rocket speed and that women with various personal responsibilities will not be able to cope and succeed at that speed. This vision is obviously collected. by male-dominated start-ups. In most start-ups that have a co-founder, you will find that gender diversity is very strong, even at senior or middle management level, ”says Upasana Taku, co-founder of MobiKwik.

Taku heads the IPO of the fintech company, which, if completed, will make MobiKwik the second female-led tech company to enter the public market in India.

The first is, of course, Nykaa. Falguni Nayar, 58, took her online beauty and personal care startup to a successful public market listing in November, becoming India’s richest self-made billionaire woman.

Nykaa is one of five female-led unicorn start-ups in India. The list includes the Good Glamm Group, the direct-to-consumer (D2C) beauty company that acquired POPxo and BabyChakra, and made Gill and Saggi the co-founders.

Also read: MPW: How Falguni Nayar Led Nykaa To A Successful IPO

“When we see more women developing, you will automatically see more women starting up,” adds Aishwarya Malhi, co-founder of Rebalance, a start-up accelerator for female founders that has facilitated more than $ 10 million in venture capital (VC ). funding for women-led businesses so far.

She says it’s time for women entrepreneurs to be supported by the investment community. “We all like to invest our time, resources and money in places that are, on some level, either witnessed or familiar. It’s natural, but it creates an unbreakable echo chamber of business and founder flows over time. As VCs, we need to actively break this. Things change for founders when we put the right amount of faith, money, and resources into their hands. Accessing it shouldn’t be more difficult for women entrepreneurs, ”notes Malhi.

Venture capital funds will need to adopt a gender lens to invest and this can be done effectively when there is better representation within senior management who assess transactions and at the level of partners who make investment decisions. .

Vani Kola, Managing Director of Kalaari Capital, explains why this is important. “Female investors are up to 3 times more likely to fund female founders. When women venture capitalists occupy decision-making positions, they are in fact twice as likely to invest in founding teams or diverse, female-led start-ups. We see that number is steadily increasing, so it’s a step in the right direction, ”she adds.

Madhu Shalini Iyer, Partner, Rocketship.vc, advocates for a dedicated fund allocation for women start-ups.

“There is a lot of support for women investors around the world. It’s time to put your money where your mouth is. A more effective way to solve this problem is to have a capital dedicated to the women founders. It’s a subjective subject, you have to have the support of LP. Once you start creating special grants for female founders, all the downstream and upstream issues are resolved, ”she says.

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