FirstCheck Africa will invest $25,000 in six early-stage female founders, in exchange for equity.
Despite the growth of the entrepreneurial ecosystem across emerging markets, one common issue still persists—the poor representation of women. There is a huge deficit of women-owned businesses, female ecosystem builders, investors, and mentors across the globe.
The issue is still inherent in developed markets. A PitchBook report of 2019, reveals that all-female founding teams received a total of $3.3 billion in funding, representing a mere 2.8 % of all rounds invested across the whole US startup ecosystem. African American women receive 0.2% (about $6 of every $1 million) of the overall funding.
Another report reveals that only 1% of all venture funding in the UK goes to businesses founded by all-female teams. Still, in the UK, the British Business Bank’s UK VC & Female Founders report of 2017, reveals that all-female founder teams receive less than 1pence of every £1 of VC investment. This is against their male counterparts who receive 89pence.
Bringing it home to Africa
At 27%, Sub Saharan Africa is home to the highest rate of women entrepreneurs in the world. However, most female-led businesses in the region are small businesses with little or no opportunity for growth.
According to IFC, the overall female labour-force participation rate in SSA stands at 61.39% in 2020, yet women only make up 30% of professionals in the tech industry. A 2016 study by Venture Capital for Africa reveals that only 9% of African startups have women leaders.
Although Africa is home to the highest rate of female entrepreneurship, there is still a disparity in funding just like their global counterparts. In 2017, a Partech report revealed that venture capital funding across Africa peaked at over $500 million, 53% on the year-on-year increase. However, only $30 million (5.3%) of that amount were received by female startups.
It even gets sadder as 2018 and 2019 reports on venture funding were no different than that of 2017. Despite the global pandemic of 2020, African tech startups still managed to raise substantial amount of funding but the ugly gender disparity still reared its head.
According to our report, only 3 of female-led startups received funding from a total of 56 startups that were funded in 2020. Also out the 56 startups, only 3 of the startups that received funding had female co-founders.
Globally, women account for only 13% of senior partners in venture capital firms. In Africa, women account for only 10% of the similar role.
There are certain suggestions on how women can bridge this gender disparity gap. But to build a bridge, we need to to first identify the problem.
Identifying the problem
The IFC evaluated venture funding across emerging markets from 2012 to 2017 and identified three notable problems causing disparity in funding.
According to their findings, the first notable issue is the low number of female-led businesses that access early-stage funding. Further analysis reveals that just a small number of female-led businesses receive early-stage funding as against the huge number of them that applied for it.
The second problem is the low rate of smooth transition between funding stages. That is from seed to series A, B, C, etc. Statistics show that female-led businesses account for 13% of early-stage funding. However, these numbers reduce drastically as they go through the equity ecosystem. In –fact, only 5% of female–led businesses make it to higher stages of funding.
The last problem identified by IFC is the limited number of female decision-makers in venture capital firms. The logic behind this rationale is that venture capital firms with women as decision-makers tend to invest in female-led businesses.
Recall that our last report revealed that female-led startups were underfunded because they weren't properly represented at the decision table. In-fact, only 10.6% of the startups funded in 2020 had women as decision makers.
IFC says women in the tech ecosystem blames gender stereotypes as one of the reasons for these problems. The IFC says women in the ecosystem were advised to learn the “language of men” in other to secure funding or scale through a pitch.
Women also blamed the disparity on being excessively punished for making realistic business plans rather than depicting ‘grand visions and lofty goals’. Hence investors cut them off on the premise of ‘expectations of growth’.
A Kaufam Foundation research conducted in 2015 states that about 50% of women entrepreneurs blame the lack of mentors as one of the biggest challenges facing their businesses.
Bridging the gap; the FirstCheck Africa solution
To bridge this gap and break this vicious circle, there is a need to aggregate multiple interventions at every stage of the financing chain. This will create room for support to female-led businesses, enhancing a smooth transition as they journey from one financing stage to the other.
Certain ventures have risen to aggregate solutions. In terms of mentorship, accelerator programmes like She Leads Africa and the Greenhouse Lab are building community support for female-led businesses. They tend to provide female entrepreneurs with funding, business support, and mentorship needed to scale their business.
The likes of Alitheia IDF--- a female-focused SME investment fund, Mama Ventures—a Kenyan-based female-focused building venture, and Janngo Capital--- a pan-African fund that focuses on female-led businesses and businesses that benefit women, etc. are already doing all they can to uplift women.
Joining them recently is FirstCheck Africa, a female-led, female-focused, angel fund and investor community. Founded by Endeavor Nigeria MD, Eloho Omame, and PiggyVest Co-founder/COO, Odunayo Eweniyi, FirstCheck aims to balance the circle for African women in tech.
The platform aims to write first checks of about $25,000 to six bold female founders with scalable ideas in their early stages in exchange for modest equity.
This launching solves the first problem identified by IFC, creating room for female-led startups to access early stage funding. Eloho and Odunayo’s will ride on their experiences in a VC and fintech field respectively to create a level playing field for African women in tech.
FirstCheck hopes that the fund will be pivotal in propelling each female-led team or female entrepreneur from the ideation stage to a pre-seed round in a 12-month period. This solves the second problem identified by IFC, as it creates a smooth transition between funding stages for African women in tech.
According to their Medium post, FirstCheck Africa believes that an intentional female-led approach is key to fixing capital access for female tech entrepreneurs in Africa.
“We believe that the best way to support female founders is to act consistently and with conviction: commit risk capital and work with women in tech to increase their odds of success, even if this means rolling up our sleeves to help women take their ideas to MVP, build early traction and raise their next funding rounds,” FirstCheck Africa.
In her launch announcement on Twitter, Eloho says FirstCheck’s goal is to create active pathways that will allow African women ‘equal hand’ in the continent through tech and entrepreneurship.
FirstCheck will achieve this through support from local and international investors who also aims to bridge the gender funding gap in Africa. To open up opportunities for other African women to invest comfortably, FirstCheck Africa will be building a female-led investor community where women can support startups with smaller checks.
Although FirstCheck Africa is female-focused, the fund is willing to invest in mixed co-founding teams. But the female member of the founding team will be a true partner and decision-maker with an equitable split of the founder equity.
The platform will be hosting information sessions this February and female entrepreneurs can up for FirstCheck's email list if they have a good startup idea, like to build a startup in the future, wants to learn about FirstCheck's angel fund or investor community, or hear ways to partner.
FirstCheck Africa’s launch is on the right track to tackle gender disparity in venture funding. This opens more doors for African women in tech to grow and expand.