Sharp Decline: Women-Led Startup Funding Plunges 88% Year-on-Year in H1 2023
The startup ecosystem in India is currently facing a prolonged funding crisis, causing widespread difficulties for entrepreneurs. Despite being the third-largest startup ecosystem globally, the lack of investment opportunities has left Indian startups starving for financial support. The year 2022 was anticipated to bring some relief, with hopes of a funding revival, but unfortunately, it has proven to be a disappointment thus far.
The dearth of funding has affected startups across various sectors and genres, exacerbating their financial struggles. Without adequate investment, these companies are unable to fuel their growth, develop innovative solutions, and scale their operations. The situation has created a sense of desperation among Indian founders who are eagerly waiting for some respite from the ongoing funding famine.
While the end of 2022 was anticipated to bring a glimmer of hope, the funding landscape has failed to provide the much-needed boost to Indian startups in the current year. The lack of funding has hindered the growth potential of these businesses and hampered their ability to thrive in the competitive market. As the funding crisis persists, Indian entrepreneurs are anxiously hoping for a change that will bring the necessary financial support to breathe life back into their startups.
Despite startup founders exercising caution and prioritizing steady growth, one glaring issue this year has been the lackluster response from investors towards the consecutive distress calls made by Indian startups. Particularly concerning is the significant decline in funding for startups led by women entrepreneurs, highlighting an 88% year-on-year decrease.
According to Inc42’s Indian Tech Startup Funding Report H1 2023, between January and June 2023, startups with at least one woman founder managed to raise $290 million, compared to the $2.4 billion raised during the same period the previous year. Moreover, the number of deals plummeted by 55% year-on-year, with only 62 deals being finalized in the first half of 2023, compared to 140 deals in H1 2022.
This decline in funding and deal count for startups led by women entrepreneurs is alarming and indicative of the broader funding challenges faced by Indian startups as a whole. The lack of investor attention and financial support further hampers the growth and progress of these startups, limiting their ability to innovate, expand, and make a meaningful impact in the market. The sharp contrast in funding trends between the current year and the previous year highlights the urgent need for increased support and investment in startups led by women entrepreneurs, who play a vital role in driving India’s startup ecosystem forward.
The prevailing funding crisis not only affects the overall startup ecosystem in India but also disproportionately impacts women-led startups, leading to an unfortunate decline in funding and deal activity. Investors and stakeholders must recognize the immense potential and value that women entrepreneurs bring to the table and take proactive measures to bridge this funding gap. By actively supporting and investing in women-led startups, the ecosystem can foster diversity, innovation, and inclusive growth, ultimately benefiting the entire entrepreneurial landscape in India.
The downward trend in funding is not surprising, as it has been a recurring theme in the startup ecosystem for some time now. In the second half (H2) of 2022, funding plummeted by 76% to $575 million compared to the first half of the year. The deal count also declined by 34% in the last two quarters of 2022 compared to H1 2022.
Despite the challenging funding landscape, there have been notable success stories among women-led startups. Aviom, a lending tech startup founded by Kajal Ilmi, raised $30 million in the first half of 2023, emerging as a top performer. Additionally, other women-led startups such as HerKey, Ossus Biorenewables, Kaparro Clean, Narrato, Kikibix, Amama, Gumtree, Clapjoy, Meolaa, and Voyaah also secured capital during this period.
Furthermore, there are startups like Blue Tokai Coffee, SirionLabs, Zypp Electric, and Mintoak that have women as co-founders and managed to raise more than $20 million in the first six months of 2023. These startups demonstrate the resilience and potential of women entrepreneurs despite the funding challenges they face.
While these success stories are encouraging, it is essential to address the overall decline in funding for women-led startups. Continued support, investment, and initiatives aimed at promoting diversity and inclusivity in the startup ecosystem are crucial to enable the growth and success of women entrepreneurs in India.
In the first half of 2023, funding for women-led startups accounted for only 5.3% of the total $5.4 billion raised by Indian startups. This is significantly lower than the 9.3% ($574.5 million) of the total $6 billion raised in the second half of 2022 and the 12.82% ($2.4 billion) of the total $18.6 billion raised in the first half of 2022. The declining percentage indicates a concerning trend of decreasing funding opportunities for women-led startups.
Inc42’s data also highlights the consistent dominance of the e-commerce sector as the most-funded sector for women-led startups during the first half of 2023. This trend has remained unchanged for the past two years, indicating sustained interest and investment in this particular sector.
Delhi NCR (National Capital Region) emerged as the top destination for women-led startups securing capital during the first half of 2023. The region has established itself as a thriving hub for these startups, attracting investors and providing a conducive ecosystem for their growth and success.
Despite the challenges faced by women entrepreneurs, there are encouraging signs of progress. The emergence of women angel investors and women-focused funds, such as SheCapital, AWE Funds, and StrongHer Ventures, has created a platform for women-led Indian startups to access much-needed funding and support. These funds have gained investor interest, as demonstrated by the recent success of AWE Funds, which announced the first close of its maiden fund in India at $15 million.
The Indian ecosystem is gradually witnessing a change, with a notable increase in the participation of Indian women in entrepreneurship. This rise in women-led ventures has caught the attention of investors who are becoming more willing to support and back these businesses. Despite the temporary challenges posed by the funding winter, women founders are determined to break the next glass ceiling and pave the way for a more inclusive and diverse entrepreneurial ecosystem in India.
This drive and determination reflect a positive shift towards greater opportunities and recognition for women entrepreneurs, setting the stage for a brighter future in the startup landscape. Additionally, the involvement of female-led family offices like DM Gupta and the rise of thematic funds further contribute to the growth and opportunities for women entrepreneurs in the ecosystem. These developments offer a silver lining and indicate a positive shift towards greater inclusivity and support for women-led startups in India.
