Indian women are storming the gates of the investor ‘boys club’

Mumbai, India – Last June, in an unconventional move, Ragini Das tweeted a request to female angel investors to join her young startup’s equity financing round.

In October, leap.club, the woman-focused professional network Das co-founded two years ago, raised just under $1m in a round led by Enzia Ventures, a woman-led venture capital firm, including investments by 13 of the startup’s members.

Now she is raising the first major institutional financing round for the startup, which is proving a lot harder but she is not planning on giving up.

“I’m pitching to a roomful of men for leap.club, which is basically for women … Finding someone who fits our bill… that gets tougher,” says Das, who quit food delivery firm Zomato to start Delhi-based leap.club with a former male colleague.

Das says she has faced “absurd” scenarios. A prospective investor, she recalls, once questioned her male co-founder about her long-term plans, asking him: “Is she going to get married and leave, or is she here to stay?”

Investors also often ignore her presence when talking numbers. “I’m the one who discusses the business [at pitch sessions], so looking [only] at my co-founder is not going to help,” she says.

Das is not the only female founder who has experienced this kind of thing. This is the bias women face in India when they try to raise any private capital.

The bias, says Aditi Shrivastava, co-founder and CEO of Mumbai-based digital media entertainment startup Pocket Aces, can also appear more subtly.

“Investors are definitely getting cognisant about including more women founders … but then, how come most women founders don’t actually get funded?” asks the former Goldman Sachs executive who led angel network Intellecap Impact Investment Network before co-founding Pocket Aces in 2013 with two men.

“Inherent biases come into play.”

A business case for gender equity

There is a stark imbalance in the funds raised by female founders, including those with hybrid founder teams, and that is a global problem.

In the United States, the world’s largest venture capital market, female-only founding teams garnered just 2 percent of the $330bn invested by venture capitalists in 2021, the lowest since 2016, according to PitchBook. Hybrid teams did better, at 15.6 percent. India-specific data is not yet available.

This despite the fact that, globally, gender equity has been a stated mandate at most venture capital (VC) and private equity (PE) firms for a while, but this has not translated into more women in investment roles.

In 2020, women made up 16 percent of PE and VC teams in India, close to the Asia Pacific average of 19 percent, according to a June 2021 IVCA-Bain & Co report. But at senior levels, women were just 5 percent of the teams.

Mandates apart, there is a business case for gender equity.

As per a 2019 research report (PDF) based on data from more than 700 PE and VC funds and 500 portfolio companies, the International Finance Corporation (IFC) noted, “The median gender-balanced fund outperformed median unbalanced peers by as much as 20 percent in annual returns.”

It also found that portfolio companies with gender-balanced leadership teams also had better valuations and saw a 64-percent increase in valuation between two funding rounds or liquidity events, about 10 percentage points higher than gender-imbalanced companies.

The report, the earliest to advocate for gender balance in private equity, says more women in investment teams lead to better investment decisions. Male investment professionals, it noted, tend to ignore or under-value businesses catering primarily to female consumers, who actually drive 70 to 80 percent of all consumer purchasing in homes.

India has role models, like online beauty retailer Nykaa, says Ragini Bajaj Chaudhary, who leads investments at Caspian Debt, the micro-lending arm of impact investment firm Caspian. Founded by former investment banker Falguni Nayar, Nykaa pulled off a wildly successful public market debut last year, scaling a market capitalisation of $13bn hours after the stock started trading. Chaudhary believes there are others with that potential and her firm actively looks for female founders to fund. In 2020, 46 percent of loans her firm disbursed were to women. In 2021, that number was slightly higher.

A step at a time

Women like Das and Shrivastava are chipping away at the status quo.

At Pocket Aces, nearly 40 percent of the 200-member team and more than 30 percent of its leadership are women. That influences the content it delivers, and its original short- and long-form web series have covered topics like female entrepreneurs.

“Every piece of our content has been built with that progressive mindset, whether it’s about women empowerment or normalising divorce … today we reach 50 million people weekly,” says Shrivastava.

It works for the startup, which says it expects to earn a profit on revenues of at least 1 billion Indian rupees ($13.4m) in the current financial year ending March.

Das wants women to have a platform to network and find leads for top jobs – through leap.club.

“Professional networking, especially for women, is broken,” says Das, as women are often locked out of the “old boys club”. Members pay an annual subscription fee of 5,000 rupees ($67.2) for benefits like micro-communities based on professional or personal interests and access to executive coaching at affordable prices. The network has more than 3,000 members and is aiming to hit 10,000 this year.

“When we started, [investors] told us: ‘Women don’t invest in their professional growth. Why are you guys going after this?’” Das says.

That partly prompted her tweet last June. “We needed more women on our cap table,” she says.

In Bengaluru, Hardika Shah, who quit a 20-year career in consulting with Accenture in the US to set up fintech firm Kinara Capital in 2011, decided from the start on a mostly female management team.

“Opportunities must be first created to enable a systemic shift… we have demonstrated both social impact and sustainable growth and profitability,” she told Al Jazeera over email. Kinara has so far disbursed more than $320m to small businesses across industries like manufacturing, trading and services, many owned by women.

Rooting out ‘unconscious bias’

Nupur Garg, former regional lead for South Asia at IFC, has taken a more macro approach to tackle the issue. Her two-year-old Delhi-based non-profit Women in PE, or WinPE, has convinced more than two dozen PE and VC firms to work to fix the imbalance. Mandates to recruitment agencies, she says, now stipulate a 30-40 percent diverse candidate pipeline.

WinPE, whose advisory board includes private equity stalwarts such as Anita George and Renuka Ramnath, has 25 member firms, including some of the biggest in the industry. These firms, Garg says, have adopted blind screening to “root out unconscious bias” and started using metrics to measure gender diversity. “Measurement is really the first step to understanding what’s going on,” she says.

Twenty-five firms may seem small in an industry with more than 700 active players, but Garg believes that these “industry-leading firms” will “create a huge push for the whole industry to move forward”.

More investment firms like female-led Enzia Ventures would also make a difference. Four of the eight companies it has backed through its angel syndicate and fund have female founders or CEOs. “This is a result of the unbiased lens we bring to the evaluation of entrepreneurs,” says Namita Dalmia, who co-founded Enzia along with Karuna Jain and Jayshree Kanther Patodi in 2019. The firm is currently raising a $40m maiden fund.

Are there really no qualified women?

Fund managers, however, say the problem lies in a shortage of talent. “We [once] kept a position open for six months because we couldn’t find the right candidate,” says a Mumbai-based fund manager for a US-based private equity firm who requested anonymity as he is not authorised to speak to the media.

Despite the diversity mandate, especially at global PE firms, “not even 10 percent of the applicants, across levels, are women,” says a recruitment consultant with a Mumbai firm that specialises in such hiring who declined to be named for reasons of client confidentiality.

WinPE’s Garg says what is lacking is outreach, not candidates.

In WinPE’s first meeting with member firms, she recalls, talent shortage was identified as a key challenge. So, the team reached out to investment banks, consulting firms and college campuses. Within six months, more than 1,000 women responded, 85 percent of whom wanted to join private equity but did not know how. “So there is supply,” she says.

Fund managers also frequently say an inadequate pipeline of bankable entrepreneurs is one of the reasons more female founders are not funded. Fund managers at leading VC and PE firms who were approached for comment declined to participate in this story.

There have been recent efforts by some of those firms to bring more female founders into the fold, but they do not spell serious intent yet. Sequoia Capital, for instance, launched the Spark Fellowship in July last year for female entrepreneurs in India and Southeast Asia. The fellowship, according to Sequoia’s website, offers a grant of $100,000 each to 15 entrepreneurs and mentorship over a 12-month period.

“But why a grant? Why not just fund them?” asks Caspian’s Chaudhary. That, in a nutshell, emphasizes the very long road women have ahead in the quest for gender equity as founders.

Sequoia did not respond to emailed queries.