Home Startups The growth of funding for women-led startups in Africa comes with many caveats.

The growth of funding for women-led startups in Africa comes with many caveats.

by Yvone Kendi
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According to the latest research, investments in African women-led firms have surged roughly sevenfold in the last three years, highlighting their investment potential.

 However, the volumes and values are still far lower than what male founders have raised in the continent’s buzzing startup ecosystem.

“Female techpreneurs have significantly raised the share of growth funds they attract—from $52 million in 2019 to $288 million by the close of 2021,” the Big Deal, shows in their latest analysis.

The share of investment going to women-owned tech startups was around 6.5% in 2021, meaning that only $1 out of every $15 raised in the African startup ecosystem goes to women-owned tech startups .“Although incredibly low, it was much higher in 2021 than in previous years, both in relative and absolute terms.”

“Kenya is driving the overall numbers, although its weight is slowly declining,” Africa: The Big Deal report said.

Kenyan female tech founders continue to attract the most funding on the continent, although their overall share has declined over the past two years. The largest economy in East Africa currently accounts for 41% of all funding raised by female CEOs in Africa, up from 61% in 2019.

Only ten female-led firms raised two-thirds of the $408 million in the last three years, with half of those startups based in Kenya. Two startups each from South Africa and Nigeria, as well as one from Zimbabwe, were among the ten. Female CEOs in South Africa and Nigeria have increased their fundraising potential 16 and 12 times in the last two years, respectively.

Insights on why Female-led startups receive less funding:

  • The majority of these female-led startups are in non-fintech industries, which may explain why they receive less capital.
  • Female founders are more likely to focus on fields like health, edtech, and sustainable technology, which do not always garner major funding. 
  • Investors believe that women-led businesses are a riskier bet and fewer women in incubation programs 
  •  Female founders hardly enroll in acceleration programs like STEM but are more inclined towards job security. 

According to a joint report by both World Bank’s Africa Gender Innovation Lab (GIL) and research consultancy Briter Bridges,all-female teams are less likely to receive funding than all-male teams – and they receive lower amounts, even when they receive funding.

“This gap exists even though the female entrepreneurs in the sample were more educated, had the same work experience as the male founders, and had experienced similar earnings changes in the previous year,” the report said.

Kenya began establishing a “vibrant national innovation system” earlier this week to facilitate the commercialization of start-up inventions through the development and implementation of laws, standards, and appropriate infrastructure that fosters Kenya’s startup innovation ecosystem.

Capacity-building programs will be introduced through a strategic partnership between the Kenya National Innovation Agency (KeNIA) and the Startups and SME Facilitators Association of Kenya (ASSEK) to facilitate the digitization of operations to improve service delivery and promote the visibility of their impact.

African companies surpassed records in 2021, receiving over $4 billion in the capital, more than doubling the amount invested in 2020. This number is predicted to double in the coming years, with investment for women-led and owned businesses expected to skyrocket.

“Some of the key areas of focus would be developing the right recruiting strategy to reach female founders, incorporating female industry mentoring and coaching to ensure support during their business life cycle and support after the program to help them fundraise as their business scales,” Kimalat said.

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