Why 17% of Indian Unicorns have female founders and what we can learn from them
日本語版 / English Ver.
Hello everyone! I’m Misuzu, an Associate at Incubate Fund, a venture capital firm focused on seed stage investing in Japan.
In my previous article, I investigated the gender balance in the Japanese startup ecosystem, comparing it partly with the US. This time we examined the startup ecosystem in India.
When you hear the words “Indian startups,” you may imagine lots of male engineers and few women, but what is the actual situation?
To find out, we looked at 1) startup entrepreneurs, 2) the startup industry, and 3) the VC/PE industry in comparison to Japan.
As part of this report, we have also included a discussion by Mr. Nao Murakami, who has been living in India since 2014 and has been investing in Indian startups as a General Partner of Incubate Fund India since September 2016.
Now, before we get into the main part of this report, I first would like to look at the labor participation rate of women in India as a whole.
According to the International Labour Organization (ILO) / International Labour Organization database (ILOSTAT), the labor participation rate* of women in India in 2022 is 24.0%, compared to 54.0% in Japan.
*Labor participation rate = The percentage of working-age population (all persons aged 15 and over) in the labor force (as defined by the ILO)
Looking at this alone, it would seem that women’s participation in society in India is less than half that of Japan.
Let’s take a look at the figures for the startup ecosystem.
1. Startup entrepreneurs — about 1 in 6 Indian unicorns* has a female founder
*Unicorn company = unlisted company with a valuation of $1 billion or more (for Japanese companies, it is defined as 100 billion yen for the sake of convenience).
According to Inc42’s report “The State Of Indian Startup Ecosystem Report, 2022,” 18 out of 105 unicorns in India have at least one female founder (!). On the other hand, of the 14 Japanese unicorns, none had female founders (based on our research using the startup information platform “INITIAL” and publicly available information as of January 18, 2023).
There is a big difference in the number of unicorn companies in the first place, but nevertheless, the percentage of companies with female founders is quite different.
2. The startup industry — 34% of employees are women
According to a survey by xto10x, 34% of employees in Indian startups are women. Although there is no comparable survey for Japan, according to Startup Lights, a project by forStartups, the most common answer for the number of women employed in Japanese startups is “between 30% and 40%”. In this regard, Japan and India seem to be in a similar situation.
3. In the VC/PE industry, the percentage of women on investment teams is 25%and 39% are in junior roles.
According to BCG’s report “Closing the Gender Gap in Investing,” the percentage of women on investment teams in India’s VC/PE industry was 25% in 2021. In addition, 39%(!) were in junior roles such as associates and analysts and 14% of partners were women.
In Japan, there is no comparable study for startups, but according to a diversity and inclusion survey conducted by the Japan Venture Capital Association (JVCA), the average percentage of female investment managers in the VC industry is 16.3%, and the average percentage of women in management and investment decision-making positions is 9.3%.
Although an apples to apples comparison is difficult as PE — specific data is only available for India, it appears India is in a much more advanced situation, especially for more junior roles.
When viewed this way, don’t you feel that there are more women in the startup ecosystem in India than you imagined? At least in terms of entrepreneurs and the VC/PE industry, it seems that we are a step or even several steps ahead of Japan.
As we saw at the beginning, women are not making as much progress in India as a whole, so why is this situation happening? We asked Mr. Murakami, who has been investing in Indian startups as a general partner of Incubate Fund India since September 2016.
＜Mr. Murakami’s profile＞
Nao Murakami
Mr. Murakami covered IT/Internet startups at Nomura Securities Group’s Tokyo and New York offices. In 2014, he moved to India, where he experienced launching startups. In 2016, he founded Incubate Fund India and became General Partner.
Incubate Fund India HP: https://www.incubatefund.in/
Linkedin / Twitter（Japanese）
1. About entrepreneurs — Role models of entrepreneurs, not only women, have been created, and there are media that properly communicate these role models.
The media is covering successful entrepreneurs and VCs who have started their own businesses, and companies are becoming more accessible, especially in urban areas. Even YourStory, India’s largest and most influential startup-related media, has one section dedicated to women entrepreneurs called HerStory, which is updated almost daily.
2-a. About Startups and VCs — There are clear advantages of belonging to a startup compared to other Indian public companies.
The premise is that India is a country with high mobility of human resources and an emerging and rapidly growing economy. In such an environment, the “stability” of belonging to a large, prestigious, traditional company can be a stumbling block to one’s own advancement (including compensation) in the face of the country’s economic growth. On the other hand, fast-growing startups and VC firms pay well, and if you produce results, you can move up the ladder in terms of compensation and experience. Entrepreneurship is the best example of this, and it is truly the best form of connecting the country’s with your own personal growth..
In this way, I feel that it is important to be able to present “clear advantages of working” and “clear advantages of starting a business” to people who want to be active in society and advance in their careers, regardless of their gender. Of course, there are risks involved, such as being laid off if you fail to produce results or making mistakes when starting a business, but compared to stagnant countries like Japan, I feel that the upside returns outweigh the risks because the country itself is growing rapidly.
2-b. Many entrepreneurs and venture capitalists have experience studying or working abroad in the U.S. or other countries, or in foreign-affiliated companies.
As India is a major human resource powerhouse and a world-class producer of engineers, many entrepreneurs and venture capitalists have experience working at the U.S. headquarters of global tech giants such as Google, Meta, Microsoft, and Amazon,at startup companies in the U.S. and Europe, and/or have studied at top U.S. universities such as MIT, Stanford, and Harvard.
In addition, many entrepreneurs and venture capitalists have experience working for global companies such as McKinsey, BCG, and Goldman Sachs, and about half of our portfolio companies have founders who have studied or worked abroad or at foreign-affiliated companies. Thus, we believe that the large number of entrepreneurs and venture capitalists with experience in other countries and companies with relatively advanced gender equality has a significant impact on fostering corporate culture.
Overall — Awareness of gender balance is growing rapidly
Gender has become a topic that always has a dedicated section in various annual reports on the startup industry, etc.
Mr. Murakami’s experience is that the ratio of female counterparts is clearly increasing. He feels that compared to Japan, women are making progress in India but are still behind compared to the U.S.
As for startups, it seems Japan is starting to make progress, with the annual income of startups exceeding that of listed companies by 7%, and the review of management guarantees in financing is progressing.
I hope that Japan will follow the lead of other countries and move forward one step at a time.
