In the dynamic landscape of African entrepreneurship, women stand as formidable contributors, driving innovation, economic growth and societal progress. Despite their significant role, however, women in tech face formidable challenges, particularly in accessing the necessary funding to scale their ventures. This article explores the pervasive funding gap and offers insights into why African women entrepreneurs receive disproportionately less investment, along strategies to bridge this divide and foster a more inclusive ecosystem.
Understanding the Funding Disparity
Africa boasts the highest rate of female entrepreneurship globally, with over a quarter of businesses led or initiated by women. Despite this promising statistic, women-owned ventures receive less than 7% of all venture capital investment on the continent. This stark funding disparity poses a significant barrier to the advancement of women in tech, limiting their ability to innovate, expand and compete on a global scale.
According to the latest data on Africa's startup landscape, out of the 200+ startups that secured at least a $1 million funding round in 2023, only 6% were led by either a solo female founder or an all-female founding team. Meanwhile, 26% of these startups had at least one female founder, whether solo or part of a mixed-gender founding team. Unfortunately, this distribution shows no significant improvement compared to the figures from 2022.
More concerning is the fact that startups with solo female founders or all-female founding teams tend to raise significantly less per $1 million+ deal compared to their male counterparts. On average, they raise $4.4 million, whereas solo male founders and all-male teams raise an average of $15.8 million—a striking difference of 3.6 times less.
Several factors contribute the funding gap faced by African entrepreneurs. Firstly, there exists a prevailing perception among financial institutions that women-led enterprises pose higher risks, despite evidence suggesting the contrary. Additionally, women often encounter barriers related to capacity, lacking the requisite business and financial skills deemed necessary by traditional lenders.
Additionally, women-led businesses face obstacles posed by legal and regulatory requirements, hindering their expansion and limiting their access to crucial resources and opportunities. Furthermore, the prevalent "bro" culture entrenched within the venture capital sphere worsens this predicament, creating an atmosphere where women encounter difficulties in earning trust and securing investments from predominantly male-run firms.
"Women must be encouraged to develop their soft skills to actively pursue financial opportunities. By expanding their aspirations, they can realize significant accomplishments. Certain programs providing financial support to women remain underutilized because many women doubt their eligibility or believe such funding is beyond their reach.”
Women also lack sufficient connections in the venture capital sphere, which is a critical gap when launching a startup. The capital acquisition process can also be arduous. Obstacles for women founders appear to be more daunting compared to those faced by men. Additionally, there are prevalent underlying assumptions and biases regarding women in business, leading to doubts about their trustworthiness with capital.
Questioning The Status Quo
Amidst these challenges, it’s imperative to question why African women receive disproportionately less investment and what measures can be taken to bridge the funding gap. Why do investors harbor doubts about the ability of women to generate significant commercial returns? How can the industry cultivate a more inclusive and diverse ecosystem that empowers women entrepreneurs?
Unlocking Solutions: The Path Forward
Addressing the funding gap necessitates a multifaceted approach encompassing systemic reforms and cultural shifts within the investment landscape.
Firstly, there's a need to challenge entrenched biases and misconceptions surrounding women-led ventures, emphasizing the immense potential and value they bring to the table.
Investor solutions proposed by experts advocate for proactive measures to drive greater levels of investment in women-owned businesses. This includes initiatives to enhance financial literacy and entrepreneurial skills among women, equipping them with the tools needed to navigate the funding landscape effectively.
Furthermore, fostering diversity within venture capital firms is paramount. By promoting equal participation of women in decision-making roles, VC firms can ensure a more comprehensive and inclusive assessment of investment opportunities. Experts emphasize the importance of diverse perspectives in driving better investment decisions and nurturing a culture of accountability within organizations.
Embracing Gender Lens Investing
Gender Lens Investing (GLI) emerges as a strategic framework to advance gender equality and inform investment decisions. By integrating gender-based factors across the investment process, GLI seeks to amplify the impact of investments in women-led ventures, thereby fostering inclusive economic growth and empowerment.
Second, GLI can help to promote economic growth and development in Africa. When women have access to capital and other resources, they are more likely to start and grow businesses, which creates jobs and drives economic growth. GLI can also help to improve the quality of life for women and their families, which has a positive ripple effect on the entire community.
Third, GLI can help to reduce poverty in Africa. Women are more likely to live in poverty than men, and they are more likely to be affected by conflict and natural disasters. GLI can help to lift women out of poverty by providing them with access to capital, education, and healthcare
Paving the Way for Women in Tech
In conclusion, the journey towards closing the funding gap for women entrepreneurs in Africa's tech sector is both challenging and imperative. As the continent's entrepreneurial landscape continues to evolve, it's crucial to dismantle barriers, challenge biases, and foster a culture of inclusivity within the investment ecosystem.
By embracing diverse perspectives, investing in women's capacity building, and championing initiatives such as Gender Lens Investing, we can unlock the full potential of women in tech, driving innovation, prosperity, and sustainable development across Africa. The question remains: Will we seize this opportunity to empower women and catalyze transformative change, or will we perpetuate the status quo, stifling untapped talent and potential? The answer lies in our collective commitment to building a more equitable and inclusive future for all.
Tune in to this episode featuring our conversation with Millie Bullbeck, as she shares her journey in Femtech and her commitment to closing the gender funding disparity. Remember to connect with us on our social media channels and join the conversation. We’d love hear from you!
