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Gender Lens Investing: Fostering Gender Equity in the Investment Landscape

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Gender lens investing is a deliberate and intentional approach to integrating gender considerations into investment strategies, with the aim of ensuring equitable investment opportunities for all genders. Traditional investment approaches have often been “gender neutral,” not favoring any particular gender. However, data suggests that these gender-neutral approaches have led to significantly lower funding outcomes for women entrepreneurs.

A disturbing picture

A recent 10X Women Entrepreneurs in India 2023 report reveals that women founders exhibit similar odds of success compared to their male counterparts. Despite equal capabilities, gender equity remains a distant goal in the Indian startup ecosystem. Only 18 percent of startups in the ecosystem have female founders, and women entrepreneurs face challenges in securing sufficient funding. The disparity in funding size has resulted in a substantial investment loss of about $3.7 billion (Rs 303 billion) over the past three years for women-founded startups. Additionally, it appears that women-founded startups may take longer to reach the Series-A funding stage compared to their male counterparts. The gender-neutral approach of traditional investing has proven ineffective, highlighting the need for deliberate, intentional gender lens mainstreaming.

What it aims to do

The primary objective of gender lens investing is to ensure that companies founded by individuals of any gender have an equal chance of being considered for funding and receive an equitable amount of funding. By promoting equal opportunities for women entrepreneurs, gender lens investing can set in motion a virtuous cycle for society as a whole. When women entrepreneurs receive equal opportunities to build successful businesses, it encourages more women to venture into entrepreneurship, creates role models, fuels aspirations, improves societal acceptance, and leads to positive societal change.

How to incorporate Gender Lens Investing 

Gender lens investing can be applied to all investment vehicles, thesis, and funding instruments. Some funds may focus solely on women-led businesses or businesses that impact women as producers, consumers, or employees. Others may mainstream gender considerations in their investment processes without altering their focus or sectors of investment, still achieving positive outcomes for women entrepreneurs. To effectively incorporate gender lens investing, investment funds must begin with promoting diversity in their own teams. Deliberate efforts to hire more women and implement workplace policies and infrastructure that retain them are essential. Moreover, funds need to collect gender-segregated data from the companies they evaluate, which can lead to insights about team diversity, retention rates, women customer feedback, and eventually promote diversity in fund teams and investee companies, thereby improving diversity across the ecosystem.

Challenges galore

Several challenges hinder the integration of gender considerations into investment decisions. These include dealing with social conditioning, low workforce participation rates for women, a limited number of women entrepreneurs, a lack of established data-driven evidence in India for the business case of investing in women-led companies, the cost of changing existing processes, and a lack of understanding of gender lens investing.

Encouraging signs

While data on gender lens investing outcomes in India is currently lacking, international reports have shown promising results. VC firm First Round reported that investments in female-founded companies performed 63 percent better than those in all-male venture teams. Women-led companies have also demonstrated 35 percent higher ROI, highlighting the potential financial benefits of gender lens investing. Individual investors and institutions can incorporate a gender lens approach into their investment strategies by consciously seeking out opportunities that promote gender equity, supporting women-led businesses, and analyzing investments through a gender-aware lens.

In short

The landscape of gender lens investing is slowly gaining momentum. Positive trends include improvements in education outcomes for women, greater participation in STEM education and higher education, and higher acceptance of entrepreneurship among women. However, challenges such as declining workforce participation for women need to be addressed. Despite this, there is hope for the future of gender lens investing, with a rising number of women taking up entrepreneurship and an increasing presence of women in decision-making positions in the VC industry. The future is indeed entrepreneurship, and women are poised to play a vital role in shaping it.

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