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Why Don’t We Invest in Women-Led Startups in Africa?

africa business women female

This International Women’s Day, we celebrate the extraordinary contributions and boundless potential of women across Africa.

But for African women starting businesses, there’s a big problem: it’s harder for them to get money from investors than men.

That’s right! There’s more money than ever going to African startups, over $5.2 billion in 2022! But almost none of it goes to businesses started by women.

Out of all the money that investors put into African startups in 2022, only 4% ($188 million) went to businesses with a woman founder. The rest, a whopping $4.6 billion, went to businesses run by men.

This lack of funding for women hurts everyone. Women often have great ideas to solve problems in Africa, but they can’t get the money they need to make their ideas a reality.

Understanding the African Context:

Beyond the raw numbers, several factors specific to the African context contribute to this funding gap:

Unconscious Bias:

Studies suggest that investors, often predominantly male, might subconsciously favor businesses led by individuals they identify with, leading to an uneven playing field.

This bias can manifest in subtle ways, from the types of questions asked during pitches to the perceived scalability of the business based on the founder’s gender.

Lack of Diversity in VC Firms:

With only 12% of decision-makers in African VC firms being women, the voices and needs of female founders might not be fully understood or represented during the investment process.

This lack of diversity within VC firms can lead to a “mirror effect,” where investment teams favor ventures that resemble their own composition, further perpetuating the funding gap.

Sector Bias:

Female-led startups in Africa are more prevalent in sectors like EdTech and HealthTech, which traditionally receive less VC funding compared to sectors like FinTech and InsurTech, dominated by male founders.

This sectorial bias further disadvantages women entrepreneurs, limiting their access to the capital needed to grow their businesses.

Cultural Barriers:

In some African cultures, women face societal challenges in accessing finance and leadership positions.

This can make it even more difficult for female founders to secure funding and navigate the traditionally male-dominated world of venture capital.

Examples of African Women Breaking Barriers:

Despite these challenges, African women entrepreneurs are demonstrating exceptional resilience and innovation.

Rebecca Enonchong

Founder of AppsTech, a global provider of enterprise application solutions.

With over 20 years of experience in the technology industry, Rebecca has become a leading voice in the African tech industry.

She is also the founder of the Africa Technology Forum, a platform that brings together African tech entrepreneurs and investors.

Founder of SweepSouth, an online platform that connects homeowners with trusted and vetted cleaners in South Africa.

Aisha’s background in mathematics and computer science helped her create a platform that solves a real problem in the South African market.

She has also been recognized as one of Forbes’ top female tech founders in Africa.

Aisha Pandor
Hilda Moraa

Founder of Pezesha, a peer-to-peer lending platform that connects borrowers with lenders in Kenya.

With over 10 years of experience in finance and technology, Hilda has become a leader in the fintech industry in Africa.

She is also a member of the advisory board of the African Women in Fintech and Payments (AWFP) organization.

These are just a few examples of the many talented women leading the charge in Africa’s startup ecosystem.

Moving Towards a Brighter Future:

Bridging the funding gap requires a multifaceted and collaborative approach:

  • VC firms in Africa:

Increase diversity within investment teams to ensure a wider range of perspectives are represented during the decision-making process.

Implement gender-neutral investment criteria that focus on the merit of the business idea and the founder’s capabilities, not their gender.

  • Governments and Institutions:

Develop programs and initiatives specifically tailored to support women-led startups in Africa.

This could include establishing angel investor networks focused on female founders, providing grant programs addressing specific sector needs.

Or offering mentorship and training programs to equip women entrepreneurs with the necessary skills to navigate the VC landscape.

  • Mentorship and Networking:

Building a strong network of female mentors and investors who understand the unique challenges faced by women entrepreneurs in Africa can provide invaluable guidance and access to funding opportunities.

Organizations like African Business Angels Network (ABAN) and Lionesses of Africa are already playing a vital role in fostering this network.

International Women’s Day serves as a powerful reminder to celebrate the achievements of women and advocate for equal opportunities for all.

By working together and addressing the specific challenges faced by women entrepreneurs in Africa, we can create a more inclusive and equitable VC landscape that unlocks the full potential of innovative solutions and fosters a future where women-led businesses in Africa can thrive.

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