How tough is it for women entrepreneurs to raise capital?

Raising capital is a stressful, daunting and long-winded process. For women entrepreneurs in the beauty business, it can be more of an uphill climb

When Romita Mazumdar—founder of direct-to-consumer skincare brand Foxtale—was looking to raise money for the start-up, she was asked by a potential investor if she intended on getting married or was planning to have children and whether these decisions would impact how her business would be run. “Just two investors put forth such questions but it gave me a glimpse of the patriarchal side of the ecosystem, and it’s unfortunate that it exists,” she says. Mazumdar eventually found a forward-thinking partner in venture capital fund Kae Capital, from whom she raised ₹5.5 crore (with another round to come), but her experience is not singular.

Raising capital is hard, and for women, it’s even harder. The numbers are astounding: in 2021, female founders secured only two per cent of venture capital in the United States, and in India, less than six per cent of all start-ups are founded solely by women. India ranks 70th among 77 countries listed in the Female Entrepreneurship Index, and women are not always offered the tools they need to succeed, given a lack of family support, financial information, infrastructure and opportunity. So when a woman does start a company, the odds are likely to be stacked against her from the very beginning. “Beauty as a category seems to draw a lot of attention in the venture capital space, which is great. However, it is certainly a challenge trying to explain to a room full of men why your lipsticks or lip glosses are different from, or, dare I say, better than those of your competitors,” says Karishma Kewalramani, founder of FAE Beauty.

Levelling up

Would it look different if there were more female venture capitalists in the boardroom? Definitely. The status quo, however, is slowly changing. The personal care and beauty products niche is growing immensely in India, and investors are learning that it pays to buy in.

“While the venture capital/ private equity (VC/ PE) space is definitely male-dominated, I was lucky enough to interact with individuals who were open-minded and took the time to research and understand our product,” says Kewalramani. Moreover, women actually make for great founders, says Mazumdar. “If there is one thing I have learnt in the last year, it is that women are predisposed to be entrepreneurs. We have a unique combination of emotional intelligence and IQ which makes us good leaders. We are resilient, know how to bounce back with each failure and only emerge stronger,” she says. Sunitha Visvanathan, a partner at Kae Capital, agrees. “We’re seeing a lot of first-time founders finding problems in their daily lives and looking for solutions by creating products to combat them,” she says. “In the personal care category, women have a lot of passion for the product they’re creating, sometimes more than a male founder would.”

What is the point of raising external capital? Building scale. “While I started FAE by bootstrapping it, it became pretty apparent, quite early on, that an immense amount of capital would be required to scale the brand. Beauty is a capital-intensive industry. The high volume of product, R&D and inventory investments, combined with the fact that it is an extremely crowded space, makes it extremely expensive to acquire and retain customers,” says Kewalramani. Additionally, you get the benefit of adding strategic investors to the table—people who know a lot about the industry and can help you streamline processes to make your product or idea scaleable.

Pitch perfect

However, there is no denying that raising capital can be intimidating, punishing and demotivating, especially if you’re at the receiving end of more rejections than you hear a “yes”. You are asked several questions you may not have answers to already, and you’re trying to explain something you care about to people that may need to be convinced to feel the same way. But these nerve-racking conversations can be the turning points in your business, says Kewalramani. “The toughest, most gruelling meetings I had during the fundraising journey turned out to be the most fruitful. The slightly more difficult questions forced me to think about parts of the business and vision that I might not have thought about independently. I truly believe it made me a better founder,” she says.

Armaan Mann, a first-generation entrepreneur and founder of Dame Essentials—a brand focussed on silk accessories to promote better sleep—says that it is important to have your own plans in place and be willing to make changes if you have to. “Ensure your proof of concept before you increase your risk profile. Adapt quickly and listen to your customers very carefully to grow and create trust in your brand. For funding partners to invest in your brand, they need to see that you are willing to incorporate constructive criticism and consider their advice,” she shares.

Confidence—says Sid Talwar, partner at Lightbox Ventures, a Mumbai-based venture capital firm—is key. Lightbox Ventures has invested in brands such as Melorra, Nua, Embibe and InnerHour—all founded by women—and like working with female founders thanks to the passion and clear vision they often have. But Talwar knows that “being confident” is easier said than done. “We’ve heard from women founders that they can feel intimidated when they’re going to raise capital. They don’t feel like they can push back, and so they get nervous,” he says. The way to push through that, he says, is to really do your homework. Know everything you can about the world you’re in, and come to the table feeling bold about your assessment and understanding about the problem you’re trying to solve.

“A VC will feel like he or she has a great bird's-eye view of the space, and that’s just the nature of the job. VCs want to see that you can convince them about your product, vision and growth plans,” says Talwar. Knowing that it’s not a one-and-done process can help. You’re likely to have the door shut on you more often than have the phone ring, and that’s okay. “You’re not going to be successful at your first try. You’ll succeed if you don’t give up.”

Knowing everything about your business means delving deep into more than just the formulation of the serum or the packaging of the eyeshadow. “While it is super critical that the passion shows through, it is equally important to look at the financial aspect. When you’re thinking of growing your business, you have to be just as confident about it as you are about the importance of niacinamide in your serum,” says Visvanathan.

“As a VC, I want to know what your go-to market plan is, what your return on ad spend looks like, do you have a performance marketing plan, are you sourcing from the right place, and what would it look like when you scale in terms of burn rate, warehousing, logistics and delivery?” she says. “You have to optimise for everything and that’s what I’m looking for in a pitch.” Authenticity is important too. In a lot of cases, when founders raise capital pre-launch or in the very early stages of their launch, investors are seeing past projecting numbers and are banking on the person helming the brand. Do they think you’re the only person that can revolutionise the space you’re looking at? That’s the question they’re essentially asking.

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