In the corporate sector, there has been a growing trend in recent years to promote inclusivity and diversity, with a focus on female-led businesses in particular. Yet as 2022 approaches, there are promising indications that this trend is gaining traction, with businesses run by women accounting for a sizeable portion of the total funding.
According to a new survey, businesses with female founders were able to account for a greater share of the total funding in value terms last year compared to 2021 as a result of women-led entrepreneurship growing popularity in India.
Key Findings
According to a new analysis by market intelligence platform Tracxn, women-led startups represented approximately 11% of the total funds raised in 2022 compared to 8% in 2021, even if investment raised by them stayed at a comparable level in terms of value, at roughly $3.9 billion during both years.
Due to a lack of late-stage finance, overall funding values decreased by over 34% year over year last year to $35.6 billion, according to the data platform.
Of the 11 unicorns (startups valued at $1 billion or more) with female leadership, it's interesting to note that five of them joined the club in 2022. They include Amagi, 5ire, Lead School, Open, and LivSpace.
According to the research, women-led firms defied the trend, receiving early-stage funding that nearly doubled from $550.5 million in 2021 to $1.1 billion in 2022, even though the fall in early-stage funding was less pronounced last year.
Women-led enterprises secured 13.4% of the cash raised by early-stage companies in India, up from 7.8% previously in terms of their contribution at this stage of fundraising.
According to Tracxn data, early-stage firms raised nearly $8.2 billion in equity rounds in 2022 compared to $7.1 billion the year before.
With this increase in funding for women-led firms, the femtech industry, which includes startups that offer digital solutions for women's and infant health, raised 38% more money overall. Around $98.4 million was raised by the industry in 2022, up from $71.2 million in 2021, demonstrating an increase in investor interest in projects focusing on the health of women and children.
Also, the report notes a 91% increase in investment for the industry over the five-year period from 2017 to 2022.
This increase in investment is supported by a growing investor preference for firms led by women. According to a story from December, Google's 75,000 crore India Digitization Fund, which it founded in 2020 with the goal of making internet access more accessible, will concentrate on funding early-stage firms run by women.
Enzia, an all-female startup capital fund, is reportedly close to gathering Rs 200 crore for its Rs 300 crore fund and may conclude the fundraise in early 2023, according to a report from VCCircle in October.
In addition to increased corporate interest in these firms, the government has intensified its efforts to encourage female entrepreneurs. In order to encourage burgeoning companies in the state, the Karnataka government and Google signed an agreement in November. In accordance with the agreement, Google will collaborate with the Karnataka Innovation and Technology Society (KITS) to give startups led by women access to partners and training in the cloud, user experience (UX), Android, Web, product strategy, leadership, and marketing in the state's Tier 2 and Tier 3 cities.
Factors Contributing to this Shift
The growing understanding of the value that female-led companies may provide to the table is one of the causes driving this trend. Companies with diverse leadership teams typically do better in terms of overall innovation and financial success, according to research. Investors are now beginning to understand that assisting women-led enterprises is both ethical from the perspective of social justice and practical from a commercial standpoint.
The increased availability of resources and support for female entrepreneurs is another element driving the development of women-led enterprises in the investment industry. Accelerators, incubators, mentorship programmes, and networking events are just a few of the new efforts and organisations that have sprung up to promote women in business. These tools give women-led companies the tools, information, and contacts they need to succeed, levelling the playing field for them.
At the same time, there is a growing understanding that not every business is a good fit for the conventional venture capital funding model. Other sources of finance have been more prevalent recently, including revenue-based financing and crowdfunding, which can be more inclusive and accessible for a wider spectrum of entrepreneurs. These business models can be especially beneficial for female-led enterprises, which may have more difficulties in obtaining finance from conventional sources.
Needs a continued push towards creating more opportunities for women in business
It goes without saying that there is still a long way to go before there is true gender equity in the startup industry. Women-led firms are getting better at getting investment, but they still make up a very small portion of the startup ecosystem as a whole. About 17% of startups had at least one female founder in 2021, and only 2.2% of venture capital dollars were allocated to companies managed by women.
There needs to be an ongoing effort to increase the chances for women in business, both in terms of money and leadership, in order to rectify these inequities. This entails tackling systematic inequalities in recruiting and promotion as well as opening up financing resources. It also entails continuing to advocate for female entrepreneurship as a worthwhile career choice and enticing more young girls and women to enter the STEM disciplines.
The nexus of technology and social influence is one future topic that might be of interest. In fields like healthcare, education, and sustainability, women-led entrepreneurs are already having a big impact by using technology to provide creative solutions to some of the most important issues the world is facing. We can advance these important goals and show the enormous value that women-led companies can add to the table by continuing to promote and invest in these ventures.
Conclusion
In conclusion, the increase in female-led companies receiving investment is a positive and inspiring development that we should all be recognising. By encouraging and funding these businesses, we can build a more inclusive and diverse startup ecosystem and advance some of our society's most pressing issues. Let's continue to strive towards a world where women-led enterprises may prosper and succeed as we head towards 2023 and beyond, and where gender equality is a reality, not just a goal.
