Women-led startups keep funding winter at bay, raise over $4 bn in 2022

Women-founded startups managed to steer clear of the funding lull as investments in such companies fell only 14 percent in 2022, a time when the entire ecosystem witnessed a drop of close to 40 percent.

Startups that have at least one woman as their co-founder raised $4.2 billion in 2022, against $4.9 billion in 2021, data collected by Tracxn Technologies showed.

However, in 2022, the overall funding in India’s startup ecosystem, currently the world’s third-largest, fell to $26.9 billion from $42.9 billion a year earlier, the data showed.

Between 2017 and 2022, funds raised by women-founded startups in India jumped. In 2017, startups with women co-founders managed to raise only $907.5 million, which nearly doubled in 2018. So far in 2023, such startups have raised $48.2 million across 25 deals. Since 2017, women-led startups have raised $16.155 billion across 2,858 deals.

The number of deals, however, has been inconsistent. In fact, the highest number of deals were in 2019, when startups co-founded by women raised $1.9 billion across 554 deals, while in 2021, when the funding was the highest, the number of deals was less than 500. Over the years, as many as 14 of the country’s 108 unicorns have had at least one woman as their founder.

While the share of funding raised by women-founded startups has increased over the last five years, it still remains very low. The share of funding raised by such startups was the highest in 2020, at 21.79  percent, and it was the lowest in 2017, at 6.73 percent. In 2022, the share of such funding was 15.51 percent, against 11.36 percent in 2021.

“Women’s representation in the VC ecosystem remains low on account of two factors — women are required to add to the income in many households in India. Further, parenthood takes them away from the workforce, and also from entrepreneurship,” said Neha Khanna, Director, ValPro Capital.

“Given the demand of  a scorching pace of growth, leading a VC-backed venture may not make for great work-life balance for a woman. Hence, employment is often preferred to entrepreneurship. The support of VCs to build better management teams for a woman-run venture is crucial,” she added.

The Tracxn data also showed that most startups founded by women in India largely catered to categories like fashion, baby care, e-commerce, direct-to-consumer (D2C) brands, and other types of marketplaces. Business-to-consumer (B2C) e-commerce topped the chart, with as many as 3,208 companies, while internet-first brands like Mamaearth, Sugar Cosmetics, etc., came second with 1,162 categories. SaaS (software-as-a-service) companies were third on the list with 1,142 companies in the category.

"We generally see women leading and running startups in sectors like baby care products, fashion brands, and cosmetics companies because the end consumer for all such sectors are women. So, women entrepreneurs are best placed to understand the needs and pains of the customer," said Apoorva Sharma, Partner, Stride Ventures.