Funding For Women-Led Startups Craters 88% YoY In H1 2023

The ongoing funding famine, which has left the world’s third-largest startup ecosystem famished, just refuses to budge. As a result, Indian startups across sectors and genres seem to be starving to the core, waiting for some respite.

Towards the extreme end of 2022, Indian founders expected green shoots of revival, if not a full-fledged funding spring, however, unfortunately, the year so far has proved nothing but a dampener.

Even as startup founders doubled caution in making blitzkrieg growth, what has stood out like a sore thumb, so far this year, is investors’ lukewarm response in paying attention to Indian startups’ back-to-back SoS calls.

Amid all this, Indian startups led by women entrepreneurs saw an 88% year-on-year (YoY) decline in funding. As per Inc42’s Indian Tech Startup Funding Report H1 2023, Indian startups with at least one woman founder raised $290 Mn between January and June 2023 versus $2.4 Bn raised in the same period a year ago. Further, the deal count plummeted 55% YoY to 62 in the first half of 2023 (H1 2023) compared to 140 deals locked in H1 2022. 

However, the trend has not been surprising as the downward spiral has been a recurring theme in the startup ecosystem for some time now. Even in the second half (H2) of 2022, funding raised by women-led startups crashed 76% to $575 Mn compared to the H1 2022. The deal count also slipped 34% from H1 2022 to 93 in the last two quarters of 2022.

Moving one, topping the charts among women-led startups, Kajal Ilmi’s lending tech startup Aviom raised $30 Mn in H1 2023. Other only women-led startups that raised capital in the period under review included HerKey, Ossus Biorenewables, Kaparro Clean, Narrato, Kikibix, Amama, Gumtree, Clapjoy, Meolaa, and Voyaah, among others. 

Then, there were startups such as Blue Tokai Coffee, SirionLabs, Zypp Electric, and Mintoak, which count women as cofounders and raised capital in excess of $20 Mn in the first six months of 2023.

Women Startups & Funding In H1 2023

In the first six months of 2023, funding raised by women-led startups was 5.3% of the total $5.4 Bn raised by Indian startups. This is much lower than 9.3% ($574.5 Mn) of the total $6 Bn raised in H2 2022 and 12.82% ($2.4 Bn) of the total $18.6 Bn raised in H1 2022.

Further, Inc42 data pointed to the recurring trend of ecommerce emerging as the most-funded sector for women-led startups during H1 2023. This trend has remained unchanged for the last two years.

Delhi NCR secured the coveted top spot as the thriving hub for women-led startups that successfully secured capital during the first half of 2023. 

Where’s The Glass Ceiling?

Amid the funding winter, the women-led startup ecosystem has been impacted the most. Critics consistently highlight various factors contributing to the decline in funding for women-led startups, including gender bias, limited diversity within VC funds, and fewer opportunities. 

As per Speixels cofounder Meghna Agnihotri, there is also the widely believed notion that most women-led startups veer towards marketing, liaising, beauty or sectors related to the extension of household work in decoration, designing or social startup segments. 

“If you want to be an entrepreneur, you will have to network and even step outside the house to find a cofounder or to get funded. Unfortunately, very rarely women are taught to take risks, and this starts from a tender age when many of us are told to stay at home and engage in daily errands,” WinPe cofounder Nupur Garg told Inc42 last year. 

Meanwhile, in the midst of global economic pressures and cautious investors, funding numbers continue to tumble. The month of June 2023 proved to be particularly challenging for startup funding, marking the lowest point thus far in a year crippled by plummeting figures. 

In H1 2023, funding raised by Indian startups withered 72% YoY to $5.4 Bn In H1 2023, down from $19 Bn during the same period last year. The deal count nearly halved to 462 in H1 2023 compared to 900 in H1 2022. 

With numbers refusing to pick up pace and investor sentiment at a record low, the situation seems to be dire for Indian startup founders. While the capital drought is expected to continue for some time now, it remains to be seen how the homegrown ecosystem weathers the storm. 

The D2C Conundrum

Agnihotri’s words carry significance when we delve into the funding data for women-cofounded startups. Over the past three years, ecommerce has emerged as the primary avenue for funding women-led startups in India. 

This trend was particularly evident in the direct-to-consumer (D2C) space, where the surge in numbers of women-led startups was fuelled by the growth during the pandemic era.

Consequently, we witnessed the rise and adoption of new-generation technology companies, such as the beauty ecommerce platform Nykaa and D2C beauty brand Mamaearth, all of which have women cofounders at the helm and have significant backing.

All the names mentioned above are unicorns.

The trend continued well into H1 2023, as women-led startups such as The Ayurveda Co (TAC), ApnaKlub, Gynoveda and Zouk raised hefty amounts from investors. 

But, the D2C momentum seems to be waning. The saturation of the online market and the allure of the omnichannel approach has put multiple roadblocks in the emergence of the space which was once a shining example of a woman-inclusive ecosystem. Making matters worse has been plummeting funding numbers, which have crunched the funding space further for women founders. 

It is pertinent to note that ecommerce funding crashed 67% YoY to a mere $1.1 Bn in the six-month period that ended June 2023. In addition, while 11 ecommerce startups made it to the coveted unicorn club in 2021, the number declined to a mere three in 2022. 

With capital drought being the new norm, avenues for cash have further narrowed for women-founded startups, especially in the D2C domain where they used to excel. 

While the recent past has seen a full brigade of female founders emerge in the enterprise tech and fintech spaces, the percentage of women bosses at the top is still minuscule. A case in point has been Indian unicorns, which account for only 15% of women cofounders.

There has also been a dearth of women-focussed funds, which could otherwise have provided a boost to Indian women entrepreneurs.

However, this is not at all surprising as gender diversity has been the Achilles heels of the homegrown tech ecosystem for a long time. With fewer female executives at the top and societal limitations at play, the number of women joining and climbing up the workforce ladder has been plagued by indifference. 

As the pandemic brought a paradigm shift in employment, the work-from-home trend, spurred opportunities for women in middle-to-senior positions in the Indian job market. With the Covid-19 effect waning and companies opting for work-from-office, the dropout rates among women have skyrocketed. 

Is There A Silver Lining?

Despite hurdles, a lot has changed for women entrepreneurs over the years. The rise of women angel and women-focussed funds, such as SheCapital, AWE Funds and StrongHer Ventures, has played a key role in providing a much-needed platform to women-led Indian startups. 

Not just this, these women-led funds are also capturing the interest of many investors. Last month, AWE Funds announced the first close of its maiden fund in India at $15 Mn. 

With a push from female-led family offices such as DM Gupta, the space is also witnessing an uptick in numbers. The rise of thematic funds has only exacerbated this trend, with investors looking to invest in both niche and emerging areas. 

Meanwhile, the change is slowly but surely making waves in the Indian startup ecosystem. The participation of Indian women in the world of entrepreneurship has seen a dramatic rise, and an increasing number of investors are willing to come forward to back women-led ventures. 

Even as funding winter poses temporary challenges, the world of women founders is all geared up to break the next glass ceiling and create a more inclusive entrepreneurial ecosystem in the country.