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Home Business TE Insights

Black Founders Face Billions in Funding Gap Despite Tech Growth in Europe, Africa

by Joan Aimuengheuwa
July 19, 2024
in TE Insights
0
Black Founders Face Billions in Funding Gap Despite Tech Growth in Europe, Africa
Source: Google for Startups

Source: Google for Startups

UBA
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The African tech industry is now valued at $482.7 billion, while European tech is valued at $20.7 trillion. 

This is a 32-fold increase in the value of African tech and a 17-fold increase in Europe over the last decade.

But despite these gains, the last eighteen months have seen a significant reversal in venture capital (VC) investment, with European investment in business software companies decreasing by 59%, and a 40% overall decline in global tech investment from 2022 to 2023. 

Africa has experienced a similar trend, with a 40% decrease in VC investment during the same period.

This was revealed in the report by Google for Startups in partnership with Notion Capital. The report investigates the intersection of diversity, entrepreneurship, and investment in the European and African tech sector, focusing on the impact of Google for Startups’ Black Founders Fund. 

It reveals both progress made and ongoing challenges faced by Black founders in securing funding and resources.

Challenges Faced by Black Founders

Investment Disparities

Since 2000, Black-led tech businesses in Europe and Africa have received $2.5 billion in investments, which accounts for just 0.51% of the total investment in all tech startups. 

In Europe, Black founders received only 0.43% of all tech investment ($2.09 billion out of $482.5 billion), and in Africa, only 3.11% ($413 million out of $13.3 billion).

Decline in VC Investment

The peak of VC investment was seen in 2021, with global heights reaching $734 billion during the pandemic. However, this figure has since dropped to $317 billion in 2023, nearly half of the amount seen just two years earlier. 

This decline affects all founders, but underrepresented Black and ethnic founders are likely to feel the impact more acutely due to existing funding pressures and systemic biases.

Funding Gaps

There is a huge investment opportunity gap for Black founders. In Europe, if investment were proportional to the Black population, it would have reached $6.3 billion from 2000 to 2023, indicating a $4.21 billion shortfall. 

In the UK alone, Black-led tech businesses should have received $3.11 billion, but they have only garnered $1.38 billion, reflecting a $1.73 billion gap. 

In Africa, the investment opportunity gap is estimated to be nearly $10 billion, considering that around 80% of the continent’s population identifies as Black.

In Europe, women-led startups received only 1.1% of total venture capital funding in 2023 – average funding for women-led startups was €3 million, compared to €6 million for male-led startups.

The situation in Africa is similar, with women-led startups receiving less than 5% of total tech investment.

Despite these challenges, women-led startups have shown resilience and potential for growth. The growth rate for women-led startups in Africa was reported at 20% year-on-year, reiterating their ability to thrive even with limited resources.

Google for Startups’ Recommendations

Policy Advocacy

Google for Startups recommends collaborating with policymakers to advocate for policies that incentivise diversity in tech and address systemic barriers faced by Black founders in accessing capital.

Investor Education

Implementing educational programs for investors is necessary to raise awareness about biases and challenges faced by underrepresented founders. This will facilitate a more inclusive investment sector.

Community Building

Strengthening community-building efforts is essential to create a supportive industry where Black founders can connect, collaborate, and share experiences.

Data Collection and Transparency

Advocating for enhanced data collection on diversity metrics in the tech industry is important to promote transparency and informed decision-making.

Inclusive Investment Strategies

Google for Startups recommends inclusive investment strategies that specifically target women-led startups. In creating funds and initiatives focused on supporting women entrepreneurs, the tech industry can address the gender investment gap more effectively.

Mentorship and Networking

Providing mentorship and networking opportunities for women founders is necessary. Programs that connect women entrepreneurs with experienced mentors and industry leaders can help them navigate challenges, gain insights, and build valuable connections.

Highlighting Success Stories

Celebrating and highlighting the success stories of women-led startups can serve as inspiration and provide role models for aspiring women entrepreneurs. These stories can also ascertain the prospect and impact of investing in diverse leadership.

Training and Development

Offering training and development programs targeted at the needs of women founders can help them with the skills and knowledge required to secure funding, manage growth, and lead successful ventures.

Gender-Sensitive Policies

Advocating for gender-sensitive policies within the investment community and broader tech sector can help create a more supportive environment for women entrepreneurs. This includes policies that address unconscious biases and promote equal opportunities.

The challenges faced by Black founders in the tech industry are multifaceted, encompassing differences in investment, systemic biases, and funding gaps. Addressing these issues requires a collective effort from various stakeholders. 

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Author

  • Joan Aimuengheuwa
    Joan Aimuengheuwa

    Joan thrives at helping individuals and businesses scale via storytelling...

    View all posts
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Tags: AfricaAfrica startup fundingBlack FoundersBlack founders ChallengesEuropeFunding GapGoogle for StartupsInvestment DisparitiesNotion CapitalRecommendationsTech GrowthTech InvestmentWomen Founderswomen-led startups
Joan Aimuengheuwa

Joan Aimuengheuwa

Joan thrives at helping individuals and businesses scale via storytelling...

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