Why are women-led start-ups receiving less funding? Can it be remedied?

Empowering women-led start-ups with strategies to overcome funding challenges and foster inclusive innovation for a prosperous future.

Why are women-led startups receiving less funding, and how can they overcome it

In today’s India, women entrepreneurs are making remarkable strides, reshaping industries, and driving innovation. However, recent trends signal a shift in funding dynamics for women-led start-ups, prompting a closer examination of the underlying factors and potential strategies to bridge the funding gap.

Understanding funding challenges

Despite the promising growth of women-led start-ups, there has been a noticeable decline in funding, posing challenges for female founders in scaling up their ventures.

Tanul Mishra, CEO of Afthonia lab contends, “Indian women-led start-ups secured about $480 million in 2023, a decline of about 80% from previous years. Market fluctuations, biases against women founders, and an overall decrease in funding across the start-up ecosystem are key contributing factors.”

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The decline in funding is not limited to a specific sector or region but is a systemic issue affecting women entrepreneurs globally. According to a report by Tracxn, “The funding allocated to women-led start-ups fell by 75% to $1.1 billion in 2023 from $4.5 billion in 2022, highlighting a significant downturn in investor confidence.”

Regional dynamics and funding distribution

Regional disparities impact funding distribution, creating hurdles for women entrepreneurs outside established start-up hubs. Jaya Bhura, Co-founder and Director of Chakraview Solutions, emphasises the need to bridge this geographical divide and empower women founders nationwide. “Initiatives such as virtual accelerators, mentorship programmes, and regional funding pools can play a pivotal role in providing equal opportunities for women-led start-ups across diverse regions,” she says.

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The regional dynamics also influence the growth trajectory of women-led start-ups. According to a study by Tracxn, “Regions with robust support ecosystems and access to capital, such as Bangaluru and Delhi-NCR, witness a higher concentration of successful women-led ventures, highlighting the importance of localised support structures.”

Strategies for late-stage funding

Implementing targeted strategies is crucial to encourage late-stage funding for women-led start-ups and unlock growth opportunities. Dr Bhavya Vankar, Director of Quantum CorpHealth, suggests specialised training, mentorship programmes, and conferences to enhance financial literacy and networking opportunities for female entrepreneurs. “Fostering success stories and highlighting the impact of women-led ventures can attract more late-stage investors,” she says.

Prominent investors and venture catalysts play a pivotal role in supporting and amplifying the success of women-led start-ups. Mishra emphasises the importance of having champions and platforms like accelerators tailored for women entrepreneurs, which can enhance their access to funding and resources. “Collaborative efforts between investors, accelerators, and women-led start-ups can drive inclusive growth and innovation in the start-up ecosystem,” she says.

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Government initiatives driving long-term growth

Government initiatives like Accelerating Women Entrepreneurs (AWEs) are instrumental in fostering a conducive ecosystem for women-led start-ups. Bhura highlights the impact of AWE programmes in empowering women entrepreneurs through financial support, mentorship, and networking opportunities. “Sustained efforts from governments, industry stakeholders, and communities are essential to ensure the long-term growth and sustainability of women-led start-ups,” she underlines.

Furthermore, regulatory frameworks and policies that promote gender equality and support women entrepreneurs are critical. According to a report by Tracxn, “Countries with proactive policies, such as tax incentives for women-led businesses and inclusive procurement practices, tend to have thriving start-up ecosystems with a higher representation of women entrepreneurs.”

Success stories and industry resilience

Success stories of women-led start-ups showcase resilience, innovation, and the transformative power of entrepreneurship. Lenskart, OfBusiness, Eruditus, and other notable ventures serve as beacons of inspiration for aspiring entrepreneurs. “These success stories not only inspire but also demonstrate the significant contributions of women-led ventures to economic growth and societal progress,” says Vankar.

Industry resilience and adaptability are key factors contributing to the sustainability of women-led start-ups. “Amidst challenges, women entrepreneurs have demonstrated remarkable resilience and adaptability, leveraging technology, market insights, and strategic partnerships to navigate complex landscapes,” Mishra avers.

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Challenges and opportunities ahead

While progress has been made, significant challenges remain to be surmounted. Mishra, highlighting the need for continued advocacy, says, “We must continue to advocate for gender diversity, challenge biases, and create inclusive environments where women entrepreneurs can thrive.”

“Educational initiatives that promote entrepreneurship among women, foster leadership skills, and provide access to resources are pivotal in nurturing the next generation of women founders,” Bhura emphasizes.

Vankar adds, “Collaborative efforts between the public and private sectors, academia, and civil society can drive impactful solutions and create an enabling environment for women-led start-ups.”

Vision for inclusive innovation

Empowering women in start-ups is not just about achieving gender parity but about unlocking untapped potential, driving innovation, and creating inclusive ecosystems that benefit society at large. By addressing funding challenges, leveraging regional dynamics, implementing targeted strategies, and championing government initiatives, we can pave the way for a more equitable and prosperous future.

As we navigate the challenges and opportunities ahead, it’s crucial to harness the collective wisdom, resilience, and creativity of women entrepreneurs. Success stories like those of Lenskart, OfBusiness, and Eruditus exemplify the transformative impact of women-led ventures, inspiring the next generation of innovators and leaders.

Looking ahead, continued advocacy, education, and collaboration will be instrumental in creating an environment where women-led start-ups thrive, contribute meaningfully to economic growth, and drive positive social change. Together, let’s champion diversity, foster inclusion, and build a vibrant ecosystem where every entrepreneur has the opportunity to succeed.

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