Investors still favor male start-up founders in Africa by a large margin
On a day of African tech funding milestones, two startups founded by women announced on Oct. 7 that they had each raised at least $2 million from venture capitalists.
Klasha runs a checkout system that online stores like ASOS can integrate to accept payments in local currencies from African shoppers, while Ejara is primarily based in Cameroon and is an cryptocurrencies investment platform. Both of them are part of an impressive list of female-founded African fintech firms that have raised at least $1 million this year.
Several of these firms founders are among the most innovative African minds of 2021. However, according to new research by Briter Bridges, and the World Banks Africa Gender Innovation Lab, their businesses remain outliers in a male-dominated funding environment.
Female-led companies are only a fraction of tenth of the number.
The report looked at 1,111 firms operating in Africa that have received venture capital financing between 2013 and May of this year. These businesses raised $1.7 billion across 1,585 transactions, which were less than $20 million per transaction. Because the study focused on early-stage financing in Africa, this benchmark was chosen.
75% of the 1,112 companies had all-male teams, 9% all female teams and 14% had a mix of male and female founders, according to Briters study. Just 3% of $1.7 billion went to all male founding teams with 76% going to the allmale team.
Even with an already small number of businesses being funded, female-led businesses do not get a proportional share of available funding.
It may be tempting to claim that this is due to the relatively lighter eras of the past decade, but the trend is still there as of last year. According to Briter Bridges and the World Bank, 84% of funding in 2020 will go to all-male founding teams, compared to 3% to ALL-female ones, with mixed teams getting 13%.
Only 3% of early-stage financing to fintechthe continents most invested sectorgoes to all-female startup teams, as with the general trend.
Worse is the culprit?
Jihan Abass, founder and CEO of Kenyan insurtech firm Lami, told the reports authors that the lack of female founders is driven mainly by the fact that there arent that many women in the finance and technology industry in general.
She believes there are solutions to be found in allowing more girls to pursue careers in science, technology, engineering, and math (STEM), and in showing entrepreneurship to girls as viable career paths. Both measures may help increase the number of women in companies who may then go on to establish businesses. These are particularly important because, as the report suggests, women-led firms tend to hire more women in staff and management roles.
A pipeline problem may not be the only explanation for the small percentage of total venture capital funding going to women-led businesses.
The report cites a confidence gap between female and male founders, where the latter are allegedly less confident in presenting investors and expecting their businesses to be profitable in the long run. However, this may be a symptom of another problem, or the result of investors who tend to associate traits for successful entrepreneurship with men rather than women. This results in founders being overly mentored rather than given money, a situation that has sparked the rise of women-focused venture capital funds in Africa.
To better understand the gender funding gap in Africa, more study is needed. For now, though, it is clear that a 3% return for all-female startups is causing concern on southeastern Europe, where women make up 58% of the self-employed population.
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