An old sugar trader within the Town of London, Jihan Abass knows the flavor of success. A particular moment to relish for that 27-years old entrepreneur arrived May 2021, when her Nairobi-based insurance tech startup, Lami, elevated its first institutional financing round. Initially funded by personal savings, the organization required in $1.8 million from investors who share the founder’s belief in the strength of mobile technology to provide lending options at scale for an underserved market.
Jihan Abbas’ story is outstanding, partly, since it remains the best. Investment capital is booming, however it flows overwhelmingly to male founders: in 2020, 85% of VC investments within the U . s . States visited firms that didn’t possess a lady around the founding team. Africa, too, has witnessed a outstanding boost in startup financing, with total investment growing almost fourfold between 2017 and 2020. Yet funding to female founders has continued to be a sluggish trickle, like a new report through the Word Bank’s Africa Gender Innovation Lab suggests.
In Looking for Equity, a cooperation using the emerging market intelligence firm Briter Bridges, we evaluate Africa’s gender gap in startup finance and explore a few of the reasons for it. For that report, we leveraged Briter’s leading industry platform to comb through many years of deal flow data and surveyed an arbitrary sample of 172 entrepreneurs operating over the continent. We spoke to founders like Jihan for first-hands accounts of ladies raising funds (or battling to do this) inside a male-dominated industry.
We discover that just 3% of early-stage funding since 2013 visited all-female founding teams, when compared with 76% for those-male teams. This amount is disproportionally small: all-female teams constitute 11% from the firms that we’ve demographic information. Even though purchase of the African tech space has skyrocketed in the last decade, the proportion likely to all-female founding teams has altered hardly any.
Our research also highlights some outstanding variations between startups brought by men and women founders. For just one factor, female founders are underrepresented within the sectors that attract probably the most financing. That’s partially since there are more male than female founders within the African tech space overall. However, female founders will also be more prone to be employed in subsectors that attract less investment, for example edtech or healthtech. Yet even if they operate in sectors rich in investor interest, all-female teams remain less inclined to receive financing than all-male teams, plus they receive smaller sized amounts when they do.
A bar chart showing Figure 1. Share of Finance Received bar versus share of Industry in firms bar
Interestingly, men and women founders within our sample of 172 entrepreneurs also adopted different financing pathways. Female founders within our sample were less inclined to pitch for equity investments than their male counterparts. On the other hand, female founders were more prone to make an application for loans from banks, in order to prefer growth from retained earnings. Among firms that elevated exterior financing, however, individuals with all of-male founding teams received greater levels of both equity and debt.
Bar and “cricle” chart showing the various between male and femal who applied (and received) equity.
We can’t say whether financing preferences really are a cause or due to the funding gap – or neither. The report raises other questions, too: we don’t take a look at the way the funding landscape varies over the primary regional hubs of Africa’s tech scene, or in the role performed by investor bias. Ongoing Gender Innovation Lab research in Ethiopia – like a longitudinal study of female entrepreneurs, experimental research on bias within the financial sector, along with a digital economy diagnostic – might help us better understand a few of these problems soon.
Meanwhile, there are several practical takeaways for anybody trying to promote gender equity in Africa’s startup environments. Encouraging more women to produce entrepreneurial ventures might be a minimum of as essential as supporting individuals who already do – but the option of sector matters. A far more inclusive entrepreneurial culture is needed accommodate the varied backgrounds and aspirations of founders, as would financing options which go beyond traditional debt and equity.
Most significantly, growing use of finance for female founders should be towards the top of everyone’s mind. When all-male founding teams receive US$25 for every US$1 likely to all-female teams, Africa is passing up on major entrepreneurial talent. And founders like Jihan Abass could be believe it or not impressive when there were much more of them.