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Do white founders in Africa have an easier time getting capital?

The topic of inequity in funding local startup founders in Africa is a recurring one in the continent. Even as investor interest in the continent strengthens and funding for African startups increases, the reality is that most of it goes to startups led by white people. A longstanding view is that it’s easier for them to raise funds for their projects in Africa, regardless of their experience in the continent or understanding of it.
Take the recent case of Robin Reecht, a French national who recently provoked the ire of Kenyans on social media when Techcrunch reported that his food startup, Kune, had raised $1 million to launch an on-demand food service. His narrative and basis for the funding, including points about Kenya having neither “great food at a cheap price” nor “a strong food culture” was problematic. He realized the “market gap” in just three days of being in Kenya. All this, Kenyans on social media said, pointed to white privilege in startup funding in Africa. Tech entrepreneurship is
amplifying pre-existing inequalities against Africans.
Research supports the notion. For example, in 2019, only 6% of startups that secured more than $1 million in Kenya were led by local founders, according to ViKtoria Ventures, a Nairobi-based consulting and fund management firm. And 70% percent of startups in Kenya that raised at least $1 million of venture capital investment in 2018 were led by white founders, despite expats making up only 0.15% of the Kenyan population, according
to analysis by Roble Musse, a USbased entrepreneur. The numbers clearly reveal a pattern. White privilege in African startups mirrors larger global inequalities Tech entrepreneurship is amplifying pre-existing inequalities against Africans, says Seyram Avle, an assistant professor who researches digital technology cultures and innovation in the global south at the University of Massachusetts Amherst. “It’s not new that Africans or black Africans are perceived in a particular way in the global market,” she tells Quartz. “The interesting thing is that tech is—at least the narrative that we’re given—supposed to eliminate some of these things. But we also know that of course not.”

It’s difficult for funders in the West to understand the opportunities in Africa, says Eston Kimani, cofounder of Africa’s Talking, an API platform for software developers in Africa building mobile phone applications. He attributes the funding inequity to a mix of issues including lack of experience with and understanding of the African market, general mistrust, and the tendency to fund companies based in the West that are operating in Africa. “It just feels like it really doesn’t work,” he says. “People abroad are thinking, ‘I am sitting in San Francisco. You want me to give my money to some random company based in Nairobi. How will I visit that company? How will I go? Who are these guys? I don’t know these guys. I don’t know if that market is even big enough.’” Kimani and his other Kenyan cofounder, Samuel Gikandi, started Africa’s Talking in 2010. They joined the Hub Ventures accelerator in San Francisco in 2012, a four-month program culminating in a demo day where members pitch to venture capitalists. They didn’t raise any money in San Francisco, but the startup grew organically, eventually becoming profitable a year later and raising $8.6 million in a Series A round led by the International Finance Corporation in 2018.

Others haven’t been quite as fortunate. SnooCODE, a Ghanaian startup that tackles the lack of formal addresses using an addressing system that provides geolocation codes, was launched in 2011 but hasn’t been significantly
able to go past its seed investment of $200,000. SnooCODE has built an addressing system for Africa, South America, the Middle East, and parts of Asia. Its Ghanaian founder and chief technologyofficer, SesinamDagadu,
strongly feels that the startup funding environment is biased towards white entrepreneurs, and something “needs to be done so that we have a fair playing field so that people can be judged objectively.” If I make calls while I’m in
London, I get treated like a different person.Despite pitching the startup to many venture capital firms, SnooCODE hasn’t had success in raising money from them. Dagadu says he occasionally visits London, and he has observed that his location influences the way he’s handled. “Sometimes, just your location, means that the calls don’t get taken seriously,” he says. “If I make calls while I’m in London, I get treated like a different person.”“The venture capital as it is described is not venturing outside of white males in Silicon Valley,” says Dagadu. African founders who have succeeded are investing in other African-led startups. As the sector matures though, the expectation is that the few African founders who successfully get funded and become the continent’s success stories, will pave the way for others. This seems to be the driving force behind the Future Africa collective which describes
itself as “an exclusive community of co-investors partnering with mission-driven startups to build the future of Africa.” Led by Andela and Flutterwave co-founder Iyinoluwa Aboyeji, the all-African management team has invested in some of the continent’s fastest-growing tech startups including 54Gene, Kobo360, and Lori Systems.

In its first fully funded deal, it raised $100,000 from eight investors within three days and received 400 applications from potential investors within the first week. There is an appetite for investing in a more equitable way in African startups. Though the fund is modestly sized—with their first round in 2015 at $1.5 million invested across 19 companies— they have now grown their portfolio to $12 million in assets under management and the startups they invest in have gone on to raise $300 million in follow-on capital. By having inequity in funding, Africa’s startup environment is missing out on a lot of talent, and losing out on building many great companies, SnooCODE’s Dagadu says. Local people, he adds, are best-placed to provide fitting solutions to local solutions.Funders such as Future Africa collective and any others that understand the unique challenges that local founders face in raising capital could play a key role in building the continent’s next startup giants.

Source: Quartz Africa