A lack of seed investments continues to prove a challenge in Africa’s venture capital space, despite increasing signs of improvement in recent years. In 2019 and 2020, only 7% of all capital went into seed companies, a figure which grew a year later to about 15% ($5 billion) in 2021.
“We are seeing a gradual increase because you need capital at the beginning [stages] so that companies can grow and scale, acquire customers and develop in order to access where the majority of the capital is,” Janade Du Plessis, general partner at pan-African venture capital (VC) fund Launch Africa Ventures, told PYMNTS in an interview.
Of the $5 billion that was invested in Africa’s VC space last year, the majority of the investment went to the region’s top recipients of venture capital including Nigeria, Kenya, South Africa and Egypt.
And of that amount, 60% went to later-stage investment rounds like Series A, Series B and Series C, highlighting the need for more capital at the seed stage, where it can take founders up to 18 months to raise between $500,000 and $2 million.
“It’s almost like a relay race. You need enough angel investors, enough seed investors and then they can go into your venture funds,” Du Plessis explained.
To help founders jump-start their young businesses, Launch Africa Ventures offers investments of up to $300,000, while providing access to investors to invest alongside the fund, which together can generate between $600,000 to $750,000 seed-stage funding for a startup.
Tough World For Female Tech Founders
While the total African VC market may be growing, the gains are not evenly spread among genders, Du Plessis said. Last year, female founders only received 0.7% of all fundraising raised by startups on the continent, equivalent to $18 million out of almost $2.7 billion.
These figures become even more stark when the difference between male-only founding teams and female-only founding teams is considered. For every $1 raised by the latter, the former raised $288, further indicating the vast disparity between men and women when it comes to access to funding.
“Today, in 2022, there is capital apartheid against female entrepreneurs in Africa. Everybody wants to talk about how women should be on boards, involved in decision making and [how] we should fund it. But where’s the money? No one’s actually putting capital where their words are,” Du Plessis argued.
Recent Launch Africa Ventures research also discovered that 91% of 350 female founders interviewed are more likely to bootstrap, sell their assets and continue to fund their startups out of their own pocket, than male founders. They’re also more likely to fail because they can’t get enough funding or a corporate contract to complete a proof of concept.
So, building on his strong passion for improving the prospects of female founders in Africa, Du Plessis has partnered with WomHub, the largest accelerator for women in science, technology, engineering and mathematics (STEM), to raise another fund called FIVE35 Ventures that will exclusively invest in female African tech entrepreneurs.
The goal, he said, is to invest $30 million seed funding into up to 80 female startups. “One thing that we will do in the next two years is to demystify this myth that there aren’t enough female tech founders,” he said.
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