One of the biggest reasons for the gender gap in venture funding is that there are fewer women founders to begin with, said Pallavi Shrivastava, co-founder of Progcap, a supply-chain financing startup.
“Even though these numbers are improving and female-led founding teams are seeing an improvement in funding, there is still a long way to go. According to a 2022 NASSCOM report, 18% of startups in India are led by at least one female founder,” said Shrivastava in an interview for DealStreetAsia’s latest report on the gender funding gap in India.
According to Shrivastava, it’s always great to have gender diversity and inclusivity in companies, including leadership teams and at the overall organisation level, resulting in a balanced approach that is a key driver of success in both fundraising and innovation.
“There is enough research evidence that companies with gender-inclusive teams outperform those with a homogenous workforce structure,” she said.
Shrivastava also pointed out the existing gender gap at decision-making levels in the VC industry itself. “There are less than 10% women in executive positions at VCs globally, and the number is even lower in India. Having said that, I believe that as the industry continues to be more supportive and more women get funding, the ecosystem will evolve. The change has already started.”
Edited Excerpts:
What led you to become an entrepreneur? How would you describe your entrepreneurship journey so far?
It was during my tenure at the World Bank that I came into close contact with the massive challenge of lack of access to finance for the last mile of businesses. Ironically, these businesses are at the forefront of driving the economy but work at the fringes with an overall credit gap of $500+ Bn to be addressed. Traditional financial institutions could not fill this gap because of various reasons, such as lack of data, credit footprint, documentation, etc., to underwrite and reach these customers. The idea of solving this massive gap that could potentially transform the lives of millions of individuals sparked my passion. But soon I realised that we had entered an extremely challenging market that required much more solving than what was visible. We had to innovate on the product and launch a customized revolving credit line that’s integrated into the supply chains and cash flow cycles of customers.
Today, within five years of our existence, we are positioned as the unique player who has disrupted retailer financing landscape of India, thus making us the largest retailer financing company in India. I believe that through our work, we are making a significant difference in the lives of retailers, shopkeepers, and their supply chains,and subsequently in the overall retail economy of India.
What challenges did you encounter while fundraising? How did you overcome them?
Every entrepreneurial journey is filled with its own set of challenges, and ours was no different. We were the first player to solve for the working capital financing needs of last-mile retailers at scale. The biggest challenge we faced as entrepreneurs was to break through a market that was used to working in an informal, unorganized way. Convincing our capital supply partners and investors that this could be a large enough market and that we could solve it with a nuanced and well-designed product was equally challenging. Our initial efforts were towards creating this market and educating the various stakeholders as much as getting the product right. Because we were working with an informal segment, risk mitigation was critical. We built robust structures, technology-based monitoring solutions, and a platform to scale.
Do you think having male co-founders made a difference in your fundraising journey?
It’s always great to have gender diversity and inclusivity in companies, including leadership teams and at the overall organization level, resulting in a balanced approach that is a key driver of success in both fundraising and innovation. There is enough research evidence that companies with gender-inclusive teams outperform those with a homogenous workforce structure. As a founding team, we bring complementary skill sets to the table, which definitely helped us in our fundraising journey. As a company, we are bringing diversity to the center of everything we do, right from hiring to internal policies, not just in terms of gender but skill set and experience as well.
Do you think that investors tend to have different expectations or standards for female founders versus male founders?
I have been an investor myself and can say with own experience that as an investor, the only thing that matters is whether the founder is passionate about the problem they are solving, whether they have the grit and determination to overcome any challenges and build a large-scale business. Those traits are the same irrespective of gender.
What are some of the potential reasons for the gender gap in venture funding, and how do you think these can be addressed?
One of the biggest reasons for the gender gap in venture funding is that there are fewer women founders to begin with. Even though these numbers are improving, and female-led founding teams are seeing an improvement in funding, there is still a long way to go. According to a 2022 NASSCOM report, 18% of startups in India are led by at least one female founder. The other reason, in my view, is the gender gap at decision-making levels in the VC industry itself; there are less than 10% women in executive positions at VCs globally, and the number is even lower in India. Having said that, I believe that as the industry continues to be more supportive and more women get funding, the ecosystem will evolve. The change has already started.
In the current environment, when funding will be more difficult to secure for most startups, could female founders find it tougher to raise capital?
It is true that the current market is uncertain, post pandemic effect, ongoing war and many other challenges have changed the scenario. But whether female entrepreneurs will face issues in raising the funds, the question that arises is who will be in a better situation to raise funds? I strongly believe that startups built on strong principles, fundamentals, unique business model, strong unit economics and those built to scale, among others, will stand out and flourish in coming times. This turbulence is for everyone, irrespective of gender.
Basically, every startup needs to re-think about its goals, why it exists, is it cost efficient, the impact it is making, is it profitable and sustainable among others. Going back to the basics for its reason of existence. The businesses that are built on right principles will surely sail through this period as well; change in market is for everyone.
What advice would you give other female entrepreneurs?
My share of advice basis my first-hand experience will be same for every aspiring entrepreneur irrespective of their gender. Finding your passion and having the opportunity to work on something that you truly believe in is once- in- a -lifetime opportunity, in fact, a blessing. Being totally consumed by an idea, pushing your limits, and embracing every challenge that comes along the way as an opportunity to solve, learn and grow is what differentiates a great entrepreneur from the rest. So cut the noise around you – where you come from, what’s your ethnicity or gender – and go after your dreams with a single-minded focus.
How can we work to change the culture and mindset within the venture capital industry to be more inclusive and supportive of female founders?
The change in culture and mindset is already happening, what we need to observe and do is to change the narrative. The onus lies on each one of us. The venture capital industry is already getting sensitized towards women founders, many programs being carried out are specifically targeting women entrepreneurs. Having said that, there are very few women in venture capital industry itself, though change is happening, but there are very limited number of women in senior positions or decision-making roles. More inclusivity and support are required here and more push on women led founding teams. Evaluations from a gender agnostic lens needs to be brought about and emphasized more.
In your opinion, what are some of the most important factors that investors should consider when evaluating a startup, regardless of the founder & gender?
I believe investors should evaluate any startup on its impact, potential and reason for existence, having passionate founders with skin in the game and a significant market size potential for long-term success. A startup with a large and growing market has a better chance of success than one with a small and shrinking market. Related to the potential is whether the startup’s product or service addresses a real need or pain point in the market. A startup with a clear and scalable business model is more likely to be successful.
Also, one that has a unique offering or competitive advantage over its rivals is more likely to succeed than the one that faces stiff competition from established players. Having said that, the quality and clarity of the vision of the founding team is most critical to the success of any startup. The team’s experience, skills, and track record to understand whether they have the ability to deliver their vision and the grit to stand through challenges at scale.
How has being a female entrepreneur influenced your leadership style and approach to running a business?
Leadership to me is a fine balance of empathy and constructive conflicts regardless of the gender. It requires, courage, candour but most importantly, care for the people you work with. I believe that regular, frequent conversations with a feedback loop is an important part of building an honest and trusting culture, one that helps to keep things simple and the best work happens in the process; results are then a by-product.