How can African female founders get better access to funding?

How can African female founders get better access to funding? Startup Lagos

The startup ecosystem in Africa is growing rapidly, with many female founders emerging on the continent. Innovative entrepreneurs across the continent are leveraging technology to turn the challenges into opportunities. There is now a paradigm shift in the tech space as international tech investors are beginning to beam the spotlight on the continent and according to Partech Africa, over $1.43 billion was invested into African startups in 2020 – a shortfall of over $0.5 billion from 2019. This year alone, at the midpoint of the year, over $1.14 billion in investment has already reached Africa.

Like in many startup ecosystems around the world, however, sadly women are being left behind in this equation. Sub-Saharan Africa boasts of the world’s highest number of women entrepreneurs, at a significant 27% relative to the entire continent. The MasterCard Index of Women Entrepreneurs 2017 listed two African countries, Uganda (34.8%) and Botswana (34.6%), as having the highest percentage of women entrepreneurs globally.

But when you dig a little deeper and you will find that in many countries in Africa, most female-led enterprises are small businesses with little opportunity for growth. Also, female entrepreneurs are not evenly spread across the continent. Raising money from investors is a challenging enough task for startup founders in general, but even more so for female entrepreneurs. A 2018 report by the Financial Times shows that women founders are not only an exception but generally encounter more barriers in getting access to funding. Globally, less than 5% of venture capital went to female-led startups in 2019. Maxime Bayen and Max Cuvellier show that since 2019, female CEOs have raised less than 1% of funding in Nigeria, about 8 times less than the rest of Africa.

How can African female founders get better access to funding? Startup Lagos

Despite its vibrant and diverse startup sector, this underrepresentation of women in tech is as evident in Africa as it is elsewhere in the world, and possibly even more. A 2020 TechPoint report estimated that only 10% of West Africa-focused startups with at least one female co-founder successfully raised $1 million or more in the last decade. The African Development Bank identified the entire funding gender gap at over $42 billion.

With venture capital crucial to catalyze business growth, the funding model needs to change. Several African venture funds in recent months have recognized this, and are turning their focus to female-founded startups while existing funds and accelerator programs are bringing more women into their fold. For example, South Africa’s Alitheia IDF fund, which focuses on small to medium businesses with high-growth potential, announced it had raised $75 million to invest in mid-sized, women-centered businesses. It plans to invest between $2 million and $5 million in startups from Nigeria, Ghana, South Africa, Lesotho, Zimbabwe, and Zambia in the coming years.

Also last year, Janngo Capital, founded by Senegalese entrepreneur Fatoumata Ba, committed 50% of the €60 million ($82 million) it had raised to startups founded, co-founded, or benefitting women. This represents proactive moves to bridging the gender gap in funding in Africa.

What way out

With the advancement of technology in the coming years, there will be more job openings in technology. It was projected that in Nigeria by 2025, there would be 1.49 million job openings that would require digital skills (Microsoft). These job openings will be difficult to fill if half of the available talent pool is still being unengaged. Therefore, it is imperative to begin to explore ways to bring more women into the industry.

Creating awareness

There are already a lot of women in tech communities in Nigeria but how much impact do these communities have in introducing more women in tech? The social networks should not be all about gaining support and inspiration from fellow women in tech, it should also be about creating awareness about the benefits of working in tech, bringing more women into the space, and supporting them as they progress through their careers. Jefferey Stine, Co-managing Partner at VestedWorld, says:

Admittedly, it’s not easy to build a portfolio that’s equally weighted among any factor when the top of the funnel is filled with 100x more of one than the other. That shouldn’t give anybody a pass but don’t ignore the top of the funnel at the same time we work on issues bottom of funnel (too few women investors & LPs, too few investments, etc.)

Catching them young

It is important to change the narrative that women cannot do tech from the homes, primary and secondary schools as well as universities. The best way to do this is to meet girls in every single age demography to get them motivated to pursue careers in STEM fields.

Summarily, women inclusion in tech is very crucial in the development of the Nigerian and at large, African tech ecosystem and so each of us has a part to play in making the industry more inclusive.

This can be achieved by promoting young women in STEM in form of mentorship and donations to organizations dedicated to the cause as well as making workplaces more accommodating for women. Addressing the gender gap in tech is as imperative as discussing the future of technology in Africa. Studies have shown that companies with homogenous workforces are less productive, make worse products, and have less return on investment (ROI) compared to companies with a more diverse workforce.

Gender diversity in tech is an urgent issue not just for the sake of balancing a male-dominated industry but because of the great impact it will have on the development of the technology sector.

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