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3 Reasons Why Female-led African Tech Startups Are Still Underfunded By Investors

Although investments into Africa’s burgeoning tech ecosystem have been on the rise recently, startups owned by female founders have only been able to get a fraction of all the funds. This is according to a report by Briter Bridges titled “In Search of Equity: Exploring Africa’s Gender Gap in Startup Financing”.

The report, which was prepared in collaboration with the World Bank’s Africa Gender Innovation Lab (GIL), found major disparities between male and female owned startups in Africa. Let’s bring you all the details.

Disproportionate funding of female-led African tech startups

After analysing the funding deals that have taken place between 2013 and 2021, the report found that only 3% of all the billions that were invested into African startups went to female-owned startups. On the flip side, 76% of the total funding during the 8-year period went to startups led by all-male teams. The report noted that this is disproportionately small.

3 Factors responsible for the disparities

The report observed that female tech startup founders are noticeably fewer in certain subsectors like the fintech space, which is known to attract the most investments. There are more male founders competing with fewer female founders.

As a matter of fact, the few available female tech founders typically prefer to operate in sub-sectors like edtech and healthtech which do not receive a lot of attention from investors. But then again, even when female founders operate in sub-sectors that are under the investment radar of venture capital firms and other angel investors, they are still less likely to attract any funding compared to their male counterparts.

Another factor responsible for the disparity in funding is that male and female founders typically choose different financing routes. For instance, the report found that female founders are likely to pitch for equity investments, unlike their male counterparts. Instead, female founders are more inclined to seek bank loans. Unfortunately, they hardly get any loans from the banks. Meanwhile, startups with all-male teams are most likely to attract both equity and debt financing.

The report also revealed that female startup founders are less confident in both their ability to pitch to investors and in their startups’ ability to grow. According to the report, this confidence gap exists even though a lot of the female founders are more educated than their male counterparts and even have better professional experiences.

“The ecosystem has been dominated by men for many years. The number of women involved in the tech startup ecosystem is small, and that is even possible because there has recently been a lot of push towards educating more African women in STEM courses. We decided to really try and put out the numbers because the idea of this report is to try to inform more policy-making, more public and private enterprise engagement and more funding for female tech entrepreneurs,” said the Founder of Briter Bridges, Dario Guiliani, while explaining the report during an interview.

Some important points that were raised by the report

  • Why are female founders less likely to seek equity? Is it because they prefer to grow organically or because equity investors do not serve their needs adequately?
  • What role does gender bias play in fundraising in the African context? Some of the female founders that were surveyed for the report said gender bias is at play.
  • The report concluded by noting that while it’s important to encourage the establishment of more female-led tech startups, it’s also equally as important to support female-led tech ventures which already exist.

Source: businessinsider


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