COVID-19 impact led to 24% decline in funding amount in H1 2020 for women tech entrepreneurs

MAKERS India, the digital media platform building a community that empowers women to succeed in the workforce, unveiled its first-ever State of Women in Tech Entrepreneurship in India report at TechSparks 2020, YourStory’s flagship annual event.

The State of Women in Tech Entrepreneurship in India report offers first-of-its kind insights and trends that track the rise, opportunities and challenges for women entrepreneurs in India’s start-up ecosystem. The report marks one year of the launch of MAKERS India, a strategic partnership between Verizon Media and YourStory Media. Over the last year, MAKERS India has led conversations to champion change in the workplace through powerful stories from trailblazing women.

Nikhil Rungta, Country Manager, Verizon Media, said, “We are deeply invested in nurturing a community of women entrepreneurs and leaders, and the MAKERS India report is a step in the right direction. By highlighting major opportunities and gaps for women entrepreneurs in tech and pointing to the right solutions, the report will guide and encourage action by stakeholders, enabling women entrepreneurs in tech to rise and play a much bigger role in India’s start-up ecosystem.”

MAKERS India’s ‘State of Women in Tech Entrepreneurship in India report is based on in-depth interviews with 100 women tech entrepreneurs across sectors and cities in India, independent research and analysis of data for the period between January 2018 and June 2020.

Snapshot of key findings from the report:

11x surge in women entrepreneurs, but funding remains a challenge

• There has been a phenomenal ’11X increase’ in the number of women entrepreneurs in tech in the last decade (2010- 2020).
• Female-founded and co-founded tech startups in India currently stands at 285.
  • Between 1990 and 2010, only 26 startups had at least one woman founder. However, 75 startups added at least one woman founder by 2014 and 184 more by 2019.
• The total funding raised by tech startups led by women founders (only) remains minuscule — just 1.43 percent ($480 million) across 80 deals between January 2018 and June 2020.During the same period, funding raised by startups with at least one woman founder accounted for only 5.77 percent ($1.69 billion) across 378 deals of the total funding.

Covid impact and response

• H1 2020 funding in women-founded startups declined 24%.
  • In the first half of 2020, funding for women-founded and co-founded startups fell 24% to $280 million, compared to $369 million in the first half of 2019. Funding declined across all three stages – early, growth, and late — in H1 2020, compared to H1 2019.
• Many women-led startups scaled down their operations or pivoted their business models to stay afloat. Notably, women became chef-preneurs from their homes. Women behind apparel startups branched out to manufacturing protective face masks and PPE kits.
• Despite COVID-19, startups with at least one woman founder were able to secure 71 funding deals in H1 2020, at par with H1 2019 (70 deals) and H1 2018 (70 deals)

Growing interest in offbeat sectors

• Women entrepreneurs in tech are exploring offbeat, and male dominated sectors such as Automotive, CleanTech, Hyperlocal, SaaS, PaaS, Spacetech, Sports and Online Gaming. This trend has grown through the Covid pandemic, with investors testing waters in niche areas.
• Fintech and fin-serv are sectors that raised the highest amount in funding and saw the most number of deals by women entrepreneurs. (Between January 2018 and June 2020).
• Edtech was a top gainer in terms of funding in H1 2020.

Rise of women entrepreneurs in tier II cities 

• Women entrepreneurs in tech rose from tier-II cities like Indore, Jaipur, Mohali, Bhubaneshwar, and Pondicherry, catching the attention of investors between January 2018 – June 2020.

Investor scepticism persists

• Ecosystem stakeholders are still sceptical about women entrepreneurs in tech. Of the 2,460 investors who participated in startup funding (between Jan 2018 and June 2020), only 22% (540) invested in startups led by at least one woman founder.

Higher exit percentage 

• The exit percentage for startups led by at least one woman founder (3.5%) is slightly higher than startups led by only male founders  (2.01%) in tech. While this is an indicator of higher exit opportunities for women entrepreneurs, on the flip side, it also points to not enough scaling opportunities being available, which forces women entrepreneurs to exit early.

What’s holding back women entrepreneurs in tech? 

• 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.