Why Women Remain Minority Participants In India's Investment Landscape

Gender inclusivity—it is a topic that is much discussed, much talked about and much written about in the start-up space. And yet the stats are dismally low and have stayed that way for many years. 

Here are some figures. Seventy per cent of private equity and venture capital (PEVC) fund managers have all-male senior leadership teams. Women form only 2.4 per cent of founding partners having control of the firm's capital. 

Not surprisingly, only 1.4 per cent to 2.3 per cent of PEVC funding goes to women-led businesses. These numbers are valid not only in India but also at a global level, giving and taking a few basis points.

To add salt to the wounds, PEVC as an industry is behind traditionally male-dominated sectors, much like the manufacturing sector, where one in three manufacturing professionals is female and 25 per cent of leaders are women. It is also behind the infrastructure sector where, as per the Organisation for Economic Co-operation and Development (OECD), women hold 19 per cent of leadership positions.

However, while women have made great strides in other areas, what holds them back from being active players in the investment sector?

Traditional Shackles Limit Access

A large part of the genesis for male dominance in the economy can be traced to how these sectors developed. During World War I, women entered the workforce in large numbers, including at factory floors, changing the workforce composition forever. 

On the other hand, finances and investments remained in men's hands as patriarchal societies dictated that they control the purse strings.

By nature, matters of finance and investments involve confidence and trust. Therefore, new entrants were 'those who could be trusted', which in broader terms meant investors and financiers hired from within their networks. 

Current research says that 75 per cent of investors hire through their networks. Access, or rather a lack of access, to (these) networks is considered a decisive factor in holding back women's participation in PEVC.

Careful, The Bias Is Showing

Continuing the same chain, because there were hardly any women in the investing industry, there have been only a handful of senior and successful women as investors or running investment firms. This is the other frequently touted factor affecting the lack of women in PEVC—the lack of role models. 

This is not limited to having role models to motivate and show that one can be successful. It is also about the question that intelligent young women are asking—what are their chances of making it to the top in this industry when hardly any women before me have? 

And when one has a workplace where more than three-fourths of employees are men and 90 per cent of decision-makers are men, traditional stereotypes and unconscious biases surrounding women and work, and women and finances are precipitated across conversations and decisions. 

Sometimes conscious biases are too. Can women travel? Can they handle financial models? Can they build their start-up without their husbands? These conscious and unconscious biases are the third important factor contributing to the lack of women in PEVC. 

Challenging Conventions 

How do we move beyond this self-reinforcing cycle of fewer women leading to even fewer women? For starters, intentionality and conscious efforts by firms are required. 

The merits of being 'forward leaning' are still debated, but that means that organisations and their leaders become aware of the challenges and consciously decide to adopt a set of measures to address those challenges for the long term. 

I advocate against output quotas like let's hire X-number of women or promote Y-number of women. Instead, bring diversity into the input pipeline, de-bias the process and results will automatically flow. This concept of diversifying the input pipeline and debiasing process can apply to many different things, from hiring to assessment, promotions, investment decisions, board appointments, and key nominations.

Execution is a challenge, though. Diversifying the pipeline is difficult, especially if it has yet to develop to the same extent. 

For example, getting a 50:50 balance in an investment pipeline would mean having an equal number of women and men entrepreneurs in the pipeline. A fund manager looking at 'women-first' businesses identified a pool of 300 investable companies—contrasting that with the annual 1000-to-5 deal funnel typically shown by fund managers. 

A 50:50 balance in a recruitment pipeline would mean that every time 1000 men apply for a role in PEVC, there will be an equal number of women candidates. At the Winpe Career Day in June 2022, the number of women candidates per position was in the lower hundreds, far from matching up to the number of male candidates. 

It is even more difficult to de-bias the process. The easiest way to de-bias would be to bring in more women and effectively dilute the influence of biases on decisions and actions. But remember that self-reinforcing cycle? 

Without interrupting that cycle, bringing in more women won't be possible. So, what do we do? For some time, training on unconscious biases was considered an answer—I have been to one—until research started to say that they do more harm than good. 

Where does that leave business leaders, because intentionality at the leadership level is key to resolving this issue? Making gender balance a stated priority, being forward-leaning to the extent possible, and creating an environment where each team member feels valued, respected and safe enough to voice opinions; are some steps the management can take. 

Secondly, they can support women with sponsorship and mentorship as they navigate the heavily male-dominated industry dynamics.

Next, they can build their communities and networks, and give women their own professional edge in addition to resources to differentiate and win with. 

But most importantly, they need to note that women don't need an environment that 'helps' diversity hires but one that assumes women are as good as their male counterparts unless proven otherwise.