“Women are building startups in Africa at unprecedented rates. In 2021, 134 female-led startups raised $834 million, 100 of them pre-seed and seed—that’s four times higher (by deal volume and deal value) than the previous year. But the numbers are still tiny, and a huge funding gap remains. It’s not great that more than 50% of that capital went to three later-stage companies with U.S.-based founders.”
— Female Venture Capital (VC) investor, Eloho Omame via Rest of World
Eloho made this statement in an interview with the American tech publication Rest of World in 2022. Two years later, the story unfortunately remains the same.
With women owning up to 30% of businesses across Africa, you’d think there was at least some reasonable funding for women tech founders. Sadly, it’s a different ballgame with massive ballpark discrepancies between male and female funding, especially regarding tech.
The Statistics
According to a 2023 report from Disrupt Africa, an analysis was conducted on 711 African tech startups that received funding between 2022 and the present year. Out of these, only 21 percent had a female co-founder, and merely 11.7 percent were led by a female CEO. Furthermore, of the total funds raised, which amounted to slightly over US$4 billion during this period, just 9.1 percent was allocated to companies co-founded by women, with a mere 2.9 percent going to startups with a female CEO or equivalent position.
The number of startups to secure funding has increased each year since 2015. In 2015, only 125 startups secured investment. This figure grew to 146 the following year, 159 in 2017, and 210 in 2018. The number leaped in 2019 to 311, and though growth slowed in 2020, it sped up again in 2021 to hit 568. Growth has again slowed in 2022, but the number is still a record.
The amount of total funding going to African tech startups also continues to increase, though the rate at which it is growing has decreased quite dramatically in 2022. When Disrupt Africa records began in 2015, the continent’s startups raised a combined US$185,785,500, though this total fell to US$129,113,200 in 2016. Thereafter, however, the growth began. In 2017, total funds raised were up 51 per cent to US$195,060,845; they soared a further 71.5 per cent to reach US$334,520,500 in 2018; grew 46.7 per cent to US$491,623,400 in 2019; and went up another 42.7 per cent to US$701,460,565 in 2020.
To understand how Africa can overcome this obstacle, I interviewed Brenda Wangari, Head of Portfolio Success at Madica, a pre-seed investment program that targets typically overlooked founders. She shared some of her journey into the venture capital space and the problems and solutions to the gender gap regarding tech funding in Africa.
“How do people with the money decide who to invest in?”
From her birthplace in Kenya to the prestigious Nigerian tech innovation center, CCHub, and back to Kenya in the energy and power space (and pivoting to startup acceleration), Wangari has spent many years asking and refining the question, “How do people who have the money decide who to invest in?”
This was after learning the “skewed nature of venture capital.” According to Brenda, a lot of capital is coming into the VC space, but the problem starts with allocating this capital. Let’s show you how to use the current landscape of tech funding in Africa as a roadmap.
The ‘Big Four’ of tech markets and fintech as the favourite industry
To understand where the problem with the allocation of capital is, Brenda shared with us a few basics that we need to understand, which include the four favourite markets for venture capital investors:
- Nigeria: due to its vast population and diversity of customers for different products and sectors
- Kenya: due to the ease of expatriates setting up companies in the country
- Egypt: for its unique role as a gateway to North African expansion
- South Africa: for its high level of development across multiple industries
However, in recent times, there has also been a critical interest in certain regions, such as Senegal in francophone West Africa and Zambia, which had previously been overlooked. The Briter Bridges 2022 report also shows a large volume of investment value as well as several deals in Rwanda, Ghana, Morocco, and Uganda. Regarding the industry favourite, Brenda explained that fintech is the most funded industry because, as people would say, “money makes the world go round.”
“This is in terms of how people transact, access credit, store this money, etc. People have built a lot of innovation around that,” she says.
Now, when you put all of these together, plus all the entrepreneurs that have been able to fundraise in the last couple of years, you’ll find out that most of them are predominantly male in either of the four key markets or the fintech industry. According to Brenda, this gender gap or bias comes in for three reasons.
Lack of consideration of STEM as a career path
Science, Technology, Engineering, and Mathematics (STEM) is an approach to education that focuses on education, critical thinking skills development, and problem-solving abilities. For Brenda, despite the recent significant changes, many women still don’t consider STEM careers when choosing a specialized field.
In her words,
“The lack of representation of women in STEM is a significant barrier to their access to funding options and the ability to start businesses in the technology sector. As a result, the industry is primarily male-dominated, making it considerably more challenging for women to have an influence. To establish an equal footing for all, it is essential to tackle this problem and encourage gender diversity in STEM.”
The statistics speak volumes. Africa has the largest volume of women graduates of STEM in the world, with 47% representation. However, there are only meager sums of these women who actually go on into STEM fields. Nigeria, for example, has only 22% of its women in STEM, while nations like Chad only have 4.8%.
Investor bias
Brenda explained the implicit bias in the types of people and businesses that investors connect with. Investors typically invest in people who look like them and companies whose models they understand. What a founder might consider a problem might not be what an investor may consider a problem.
She highlighted the need for investors to ask questions from a growth perspective. This report by the IFC and Village Capital highlights that investors tend to spend more time asking female founders risk-related questions than their male counterparts.
“These questions could be about how big the company can grow. What type of customers they can acquire, and what markets can we expand to? That typically has not been the experience of many female founders in the space,” she says.
De facto female founders
In the past, there has hardly been support given to women who are not technical founders. Brenda also mentioned the high rise of “de facto female founders” on their deck or website simply because of the high amount of gender advocacy done in the space.
“Now, we have entered an era where there are female founders in actual leadership positions writing cheques, running funds, and running communities geared towards providing holistic support for women running tech companies.”
“What are the specific challenges women face in getting funds from VCs?”
Brenda’s voice seemed to carry the weight of past struggles when she responded to this question, outlining the challenges. Some of these were:
Access to investor networks
This has proven to be a big challenge for women. In some ways, the VC space is very exclusive, so you need to find ways to get your foot in the door of that ecosystem and get people to pay attention to what you’re doing.
A mismatch between businesses and money available
As an expert in the space, Brenda has been part of initiatives supporting female founders, and in her experience, she has seen female founders run “very niche/lifestyle businesses that a typical VC would not fund or look for.”
“There’s also a mismatch between the businesses people run and the money available. Venture capital might not always be the right fit for every business. There needs to be tech embedded in the business; the highest tech some of those types of businesses have is a website.”
She also explained the nature of the venture capital business as a “high risk, high return” money game and the need to build a company that scales across different customer segments and markets and provides a lot of return for investors.
These challenges might have led to fintech being only a male-dominated platform, but there is now an emergence of other sectors where more women are involved. For instance, in Ghana, the most funded sector in the last 2 years was logistics, and Jetstream (the company with successful fundraising) was founded by women. However, the statistics still beg to differ. According to a 2024 TechCabal Insights report, only 1.5% of funds raised by African startups between 2019 and 2023 were allocated to businesses led by women.
We have talked about problems. Now, what are the solutions?
We can look at this in two ways: the general approach and the Madica approach.
The general approach
In the general African tech ecosystem, Brenda highlighted two ways by which the gender gap in tech funding could be bridged:
Building from an inclusive angle: Brenda is all about having investor firms with a mandate towards funding women founders or decision-makers. She also highlighted the need for open conversations to remove the inherent “plaster solutions” from having female de facto founders.
“When we have honest conversations regarding what they have as biases, then it helps foster a community where there is openness for issues surrounding gender. I think it’s a very sensitive topic, and it is not approached with the sensitivity it comes with, there will be plaster solutions.”
A diverse investment portfolio: For Brenda, change starts not from the bottom but from the very top. If a VC firm wishes to have an investment portfolio, important questions should be asked, such as:
- Does the VC firm have diversity in their investment committees or teams?
- Is there diversity in terms of the people making decisions on the deals/proposals to pursue?
Luckily for all women on the continent, Madica has already built a solid investor system that works for them. This is what I would like to call “The Madica Approach.”
The Madica approach
Madica, which Brenda is a part of, is a venture capital firm committed to casting away certain myths about Africans having to fit a particular box before they get funded. This has made them very keen on supporting female founders in the following ways:
Having diverse investment committee teams: More than 50% of the Madica team are all females.
Collaboration with other female-focused organisations: “Typically, Madica works with other organisations with the mandate to support female founders, educate investors, or bring ecosystems together. For instance, we are part of the “Women Who Build Africa Assembly,” a community that supports female founders across the continent and gives them access to investor networks and the typically unavailable advisory type,” says Brenda.
Intentionality in female founder support: The team at Madica is committed to ‘walking the talk’ regarding female founder support. We cast a wide net to include many female-led companies in our investment pipeline and access to quality female mentors with experience in business management, expansion, and fundraising.
Ecosystem-building initiatives: A vital part of these initiatives for Brenda is ecosystem research, like the research on gender funding gap trends, which was done with Disrupt Africa. “That storytelling bit is not seen a lot. Who are the women who are building venture businesses and writing checks? How do we access them, and what are their stories? This is something we are keen on,” Brenda explained.
Creating intentional conversations between investors and founders: When investing, the relationship with the investor doesn’t start with the cheque being signed. To help both investors and founders align better and understand each other’s vision, Brenda highlighted the creation of various team bonding techniques through immersion trips, mixers, dinners, and curated conversations where the investor explains techniques and the thought process behind investing in various companies.
The future of African tech funding for women
Brenda sees a very prosperous and promising future for women tech founders—one in which they are leading the charge both in business and job creation, investment returns, and positive impact on their local economies.
“There are various strides being made towards more intentionality in including women in decision-making, giving them access to world-class support and networks that are typically hard to access. With these being implemented, this makes me see the future of African tech funding as a very promising one for aspiring women entrepreneurs on the continent.”
We also believe that VC firms can propose actionable steps and commitments towards the support of gender equity in funding. Some of them include:
- Culture: Flexible working hours, locations, and support for equal maternity and paternity benefits were rated as highly effective interventions by the women surveyed and offered by over half the firms surveyed. However, women need senior role models to feel more comfortable taking advantage of these initiatives and policies.
- Recruitment: Increasing focus on recruiting women via a variety of initiatives was perceived to be effective. Firms that are making progress in this dimension are doing so by widening the ‘top of the funnel,’ i.e., increasing the number of women they interview for entry-level roles and widening the aperture to hire women laterally from adjacent industries for mid-to-senior level roles.
- Advancement: According to the firms surveyed, the top reason for attrition of women was a life event such as maternity, with working hours and company culture not far behind. Active talent management for high-potential women and a conscious focus were cited as highly effective interventions to retain and support the advancement of women.
Leadership: It is important to offer senior role models to women (within and outside the business), and men in these roles must champion and jointly drive the gender diversity agenda within their firms.
