Gender disparity across the Indian startup ecosystem narrowed only a little in 2021 even as startups managed to raise record funds at high valuations during the year, a report by homegrown venture debt firm InnoVen Capital showed.
The report, titled, India Startup Outlook Report, showed that about 70% of startups in the country have less than 20% women in leadership roles, compared to 77% in 2020, while about 41% of startups have less than 10% of women in leadership roles.
“While gender diversity in startups and tech has started to get a lot of attention lately, it continues to be a challenge. This is not an India centric issue as we have seen similar trends in the US. In the US, female founders secured only 2% of venture capital in 2021, while startups with at least one female founder got 15.6% of total funding,” Ashish Sharma, managing partner, InnoVen Capital India told VCCircle in an emailed response.
The gender disparity stands little changed even compared to 2019 when about 69% startups had less than 20% women in leadership roles. Improving gender diversity continues to be a challenge, the report said.
“There are several reasons for this, some being factual while there may also be some hidden biases that may have crept over time. Firstly, there is a lesser number of female founders in the ecosystem. Secondly, we have real supply-side issues, particularly in tech, operations & sales, where the talent pool of experienced professionals is overwhelmingly male. Then there are cases where some qualified women professionals may choose not to join a start-up, given the unpredictable work schedule and work/life balance issues,” Sharma said.
Around 100 startup founders participated in the InnoVen survey across stages and sectors.
The report also showed that Indian startups raised a record $38 billion in 2021 with about 84% of founders having a positive fundraising experience during the year. In 2020, only 54% of founders had a favourable experience in raising funds. Going forward in 2022, about 75% of founders believe that the fundraising environment will improve further.
The survey showed that about 83% of founders had a higher bias for growth over profitability as a focus area. About 20% of startups surveyed claim to be EBITDA (earnings before interest, tax, depreciation, amoirtization) profitable, while 51% aim to turn EBITDA profitable in the next two years.
With blockbuster initial public offerings (IPO) of companies such as Nykaa, operated by FSN E-Commerce and Zomato, exit expectations of founders increased in 2021. Further in 2022, 71% of founders believe that IPO is the likely mode of exit for their investors against about 47% of founders in 2020. Meanwhile, 58% of founders chose IPO listing in India against 30% in 2020.
The report also showed that about 75% of founders expect a higher pace of hiring in 2022 in sectors such as fintech, D2C and agritech, as they believe these sectors will attract large funding in 2022. About 81% of founders are of the opinion that companies will hire a professional chief executive officer for running operations in future against 73% a year earlier. Around 19% of respondents believed that founders should remain in charge, and there was no need for a professional CEO, but the number was down from 27% a year earlier. The report also showed that late-stage startup founders are more open to hiring a professional CEO.
Assessing the impact of Covid-19 on work culture in startups, the survey said that there was no consensus on whether Covid was a positive influence on the culture or not. However, about 54% of startups are operating in either work-from-home or hybrid models, which is expected to continue in 2022. Founders were also divided on Covid’s impact on productivity, innovation, collaboration and work-life balance. Half of the founders said they saw covid impacting positively, while half of them felt otherwise.
The InnoVen survey also revealed that founders were of the opinion that quick commerce, essentially grocery delivery, was the most overhyped sector of 2021 followed by edtech and crypto. On the other hand, the health-tech sector was the most underhyped sector of the year followed by agritech and D2C.
Online stock trading firm Zerodha Securities Pvt Ltd was chosen as the most admired startup for 2021 by the founders, followed by Swiggy (Bundl Technologies Pvt Ltd), Zomato, Razorpay Software Pvt Ltd and Nykaa. Deepinder Goyal of Zomato, meanwhile, was chosen as the most admired Indian startup founder for 2021, followed by Zerodha’s Nithin Kamath, Nykaa’s Falguni Nayar, Sridhar Vembu of Zoho Corp, and Girish Mathrubootham of Freshworks Inc. On the global side, the founders chose Elon Musk, currently the world’s richest person, as the most admired founder.