Research has shown that start-ups led by women may be more profitable, but funding remains a challenge
Jyoti Pande Lavakare / Feb 25, 2012, 00:30 IST
Over the last 14 months that I’ve been writing this column, I’ve had a chance to observe the Indian entrepreneurial ecosystem at close quarters. Of course, marriage in the pre-internet world to an entrepreneur whose life straddled Silicon Valley and India for almost 20 years has also allowed me insights into these worlds as they evolved.
I find more women dotting this landscape than ever before. Don’t get me wrong — there are still far too few women in this male bastion, but the numbers are proportionately higher than ever. So, with International Women’s Day coming up, I’d like to dedicate this last Garage Gigs column to all those women out there.
Since there isn’t much data on how gender-neutral this ecosystem in India is, I’m depending mainly on anecdotal evidence. Hemant Kanakia, an angel investor and general partner with a US-based venture capital (VC) firm, says he sees many more women entrepreneurs pitching for funds in India than he saw as a VC in the US.
“Of the 85-90 companies in which my VC firm invested between 2000 and 2009, there wasn’t a single one with a woman in its founding team. Of the 300 presentations I must have sat in on, I don’t recall there being more than two or three where women were leading the presentation,” Kanakia says. Since he relocated to New Delhi in 2009, Kanakia has seen many more women founders – “I’d say about 10 per cent” – making pitches to VC firms.
However, there are few women entrepreneurs in high-tech areas. Perhaps this is a result of the educational path we allow our children to take. The ratio of boys to girls in top engineering colleges makes it abundantly clear why we have more mom-preneurs than techpreneurs around.
“It is completely dry,” says Pankaj Jain, who runs Kauffman Foundation-supported Start-up Weekend in New Delhi, an event to share ideas, form teams and launch start-ups over one weekend. “You have more chances of finding water in Rajasthan than finding women in hi-tech.”
Kanakia points out, however, that entrepreneurship was more tech-driven in the past, but “now there is more e-commerce”. Which is probably why although there are few women founders in tech-heavy areas, they more than make up by self-selecting themselves into softer areas such as education, HR, e-commerce, fashion, publishing, tourism, art and media. And the internet has allowed women to set up e-businesses in these sectors with social networks making them more visible.
Take Neha Kirpal, who almost single-handedly made the India Art Fair an international event — in June 2011, she sold 49 per cent of her stake to international partners. And Deepa Krishnan, who grew Mumbai Magic, her online customised tourism venture “born out of a midlife crisis”, to a company that will earn revenues of Rs 6 crore in 2011-12. Or Janhavi Parikh, an engineer from California who quit her job at Yahoo in Singapore to move to India and co-found Aurality, a mobile entertainment platform whose text-to-audio prototype is ready to launch. And Sairee Chahal, who co-founded Fleximoms, an HR site for people with flexible work-hour needs, along with Anita Vasudeva in 2011 and has already broken even.
At a Stanford alumni mixer a few months ago, I met a young engineer who told me how her start-up was going to solve all existing e-commerce payment issues in India. Upasana Taku was confident about Zaakpay, her e-payments venture (she has worked for other e-commerce payments businesses, including PayPal). Anyone could see how committed she was to her start-up; yet she’s been asked whether this is a “lifestyle” job for her.
Another dynamic young woman I’ve met at different entrepreneurial forums has been looking for funding for her venture for the last two years. She tells me about a potential investor who told her he would definitely have invested in her start-up — if it was something else. What will I tell my wife, he asked. Arpita Ganesh’s start-up is fitted, premium lingerie. She still hasn’t found funding for Buttercups, but hasn’t given up yet — she recently moved from Hyderabad to Bangalore and is taking her business online.
“People tend to be quite condescending towards women entrepreneurs, especially in the manufacturing and IT world,” says Uma Balakrishnan, who has worked in the engineering and industrial automation field for 28 years. She started her own industrial software company in 2001, renamed Axcend Automation and Software Solutions in 2004.
But it helps that entry barriers are lower here. “It’s definitely cheaper to start up out of India,” says Parikh, who founded Aurality out of India, even though her product is global and currently targets only the US market.
No one’s saying that people are making a special effort to exclude women, but there could be other reasons for the lack of gender diversity in this ecosystem.“Men tend to self-propagate. Women are almost apologetic,” says Sangeeta Murthi Sahgal of private equity fund Lumis Partners.
“Men and women have very different barometers of success,” says Chahal. Although the delivery of both may be on a par, women will ask for less capital than men and be more circumspect, she says. And that may be a good thing, according to a white paper by California-based Illuminate Ventures. It says that high-tech companies built by women are more capital-efficient than the norm. Illuminate, founded by Cindy Padnos, invests in start-ups led by women. It also says gender-diverse entrepreneurial teams outperform their peers. Organisations that are more inclusive of women in top management achieve 34 per cent better total return to shareholders. So, investing in women-led start-ups may actually be more profitable, and that’s what funds like San Francisco-based Golden Seeds, which emphasises investing in start-ups led by women, are banking on, fund managing director Gwen Edwards told me several months ago when she was in India.
A Kauffman study has shown that although women VCs say they are gender neutral about funding decisions, firms with senior female investors are more likely to close deals with women-led start-ups. Illuminate also validates that. “Firms with women investment partners are 70 per cent more likely to lead an investment in a woman entrepreneur than those with only male partners.” Hurray for that.