"Is it Because I’m Black or a Woman That I Can’t Get Funding?" Address the Barriers to Supercharging Africa’s Tech Startups

Technology Policy Tech for Development

"Is it Because I’m Black or a Woman That I Can’t Get Funding?" Address the Barriers to Supercharging Africa’s Tech Startups

Commentary
Posted on: 8th April 2022
Belinda Baah
Policy Lead, Tech for Development

Last year was a great one for the African tech startup scene. The continent raised its highest level of venture capital in 2021, securing funding of $4.9bn, a 2.5x increase from the amount raised in 2020.

The number of years it takes to become an African startup to reach the billion dollar "unicorn" valuation has decreased from 17 years to an average 3.75 years. Despite these gains, Africa still lags in the scale and depth of its startup ecosystem when compared to the rest of the world. Though funding to African tech startups is increasing, the proportion remains dismally low, with Africa accounting for less than 0.2% of the value of global tech ecosystems.  

A closer look at where funding is going reveals other concerning trends: funding is primarily flowing to male, white founders.   

This follows the (dismaying) trend seen elsewhere. Black founders in the US receive just 1.2% of tech funding in 2021 compared to an overall black segment of the population of more than 13%.

Just 20% of tech startups in 2019 had at least one female founding member. In the UK, less than 1% of venture capital goes to all-female teams. For black women, this figure drops to 0.02%, highlighting the often-negative compounding impact of the intersection of race and gender.

The data tells a similar story in Africa.

 

Is it Because I’m Black? What Funding Data Tells Us

Amidst the growth in funding for African startups, only $3.2 billion out of $13.6 billion of funding raised in Africa since 2012 was raised by companies with at least one black co-founder. That’s just 24% of funding on the continent.

In South Africa, where the total white population is 9.2%, 24% of white-founder led startups reported raising R1-million (approximately $70,000) or more to fund their businesses, compared to just 2.5% of black African founders.

Indeed, many of the founders of African startups don’t hail from the country in which the startup is registered, or even from the continent.

As one analyst put it, “white tech startup founders are 50,000% more likely to get funded in Kenya than the USA”. In 2018, 70% of startups in Kenya that raised over $1 million in venture capital investment were led by white expatriate founders.

An environment in which non-African white founders can win funding with relative ease, but black-led startups are unable to raise money, is one which governments should look at with real concern.

 

How Funding Female-Founded Startups Will Help Bust the Tech Boys' Club

There is evidence to show that female-led startups perform better than those led by all-male teams. We also know they can contribute to gender inclusion: African companies led by women were twice as likely to hire women and four times as likely to employ female managers.

There should therefore be plenty of reasons to support investment in women-led startups. But throughout 2021, less than 1% of funding flowing to African startups went to female single founders or female-only founding teams, with 82% raised by male single founders and male only founding teams.

In 2021, less than 1 percent of funding flowing to African startups went to female single founders or female-only founding teams

Source: The Big Deal (Jan 25, 2022). ‘This is a man’s man’s man’s world…

Again, for any African policymaker looking to achieve the potential of entrepreneurship on the continent, this should make for worrying reading.

What Can Be Done? Creating New Tables and More Seats

To level the playing field within African tech startup ecosystems, we must not only increase the number of seats at the table but create new tables. As Daisy Onubogu articulates so well, “it might be better for us to create more variance not merely in the range of players but indeed in the game itself”.

A more robust African tech ecosystem has to be a more inclusive one. This is important simply to tap into a wider pool of talent, something that would always be attractive. But more than that, African challenges are often unique, complex, and non-linear in nature, so drawing in African people with deep contextual understanding and knowledge is a must if we are to hope for sustainable solutions.

Cultural shifts take time. Biases that are inherent within the system (and not unique to tech/startup industry) will not be eradicated overnight. But there are tangible, concrete steps that can be taken to stimulate the tech startup ecosystem in Africa.

Our recent report on how to put the African continent on the path to tech excellence contained several recommendations for governments that help redress these imbalances:

 

  1. Addressing information asymmetries and building systems to support everyone to excel. This means equipping founders with training on how to attract funding, new funding sources, and mentoring opportunities specifically targeted at underrepresented groups.  
  2. Implementing policies that make it safe to fail. This could include implementing safety nets similar to Tunisia’s “Startup Leave” which allows workers to go back to their previous job within two years of their departure to launch a startup.
  3. Strengthening networks to increase knowledge-sharing, visibility of entrepreneurs and access to diversified opportunities. Connections bring in capital and make deals happen.
  4. Improving digital skills to address socioeconomic barriers to entry in tech startup ecosystems.  

 

Africa’s tech scene faces a few crucial years. With the right policies we are confident it can grow rapidly and enable the best innovations to excel. But these policies must bring into play a wider set of tech founders than are currently enjoying success.

There are challenges to overcome everywhere in the world. But in Africa, a black-majority continent with a growing and dynamic female entrepreneur scene, the issue is not just one of equity.

We will only be able to supercharge Africa's tech startups for all Africans if we are ready to overcome the barriers to success for black- and women-led startups.

If Africa can overcome these barriers, it can set itself on the path to supercharging tech start-up ecosystems across the continent.

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