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‘Do You Know the Money Belongs to the Company?’: Top Investors Fund White Startups In Africa While Talking Down To, Overlooking African Entrepreneurs

A significant portion of African venture capital deals are funded by North American investors, and by American dollars in particular. However, among the major well-funded startups originating on African soil, most are led by outsiders not native to Africa. In addition, foreign startups are more likely to receive investments from the world’s largest firms than startups founded by Black African locals.

Because African investors don’t contribute the lion’s share of investments available to startups on the continent, entrepreneurs are forced to look elsewhere for cash. Front-runners like Goldman Sachs, Stanford University, and the Chan Zuckerberg Initiative have historically all been more likely to invest in Africa-based startups founded by white people than in those founded by Black Africans. Of the 10 most well-funded African startups of 2019, eight were run by white people. Furthermore, a project completed in association with the Kauffman Foundation found that 75 perent of the money raised for startup investment goes to all-white teams.

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Overall, Africa’s economic power continues to increase. In 2019, Nigeria and Kenya led the continent in money raised and allocated for African startups. Together, the two countries raised more than $800 million worth of startup funding. Of the 17 Kenyan startups that raised over 1 million dollars, only one was founded by locals. In Ghana and Uganda, the story is similar, and local startups make up only a small fraction of the nations’ entrepreneurial endeavors. While both countries are home to eight and six startups, respectively, only one startup in each nation was started by a local Black African team. In 2017 just 10 percent of funding raised for East African startups went to local entrepreneurs.

Many of the expats who profit off of starting businesses in Africa had never even lived on the continent. A Medium report from February found that 65 percent of white startup founders in Kenya had never lived in Kenya before setting up shop there. The same piece concluded that white founders are nearly 50,000 percent times more likely to receive funding in Kenya than they would in America.

Grant Brooke, an American who co-founded a Kenyan-based startup, offered an explanation for the disproportionate number of expat-founded companies in the country, told The Guardian, “There’s a lot of young Westerners who can afford to take off a year or two of their life and not have income and try to start something because their parents will support them. … Kenyans can’t even move to America without having a job, yet Americans can move to Kenya legally.”

While whites have benefited from a new frontier of economic opportunity and prosperity in Africa, Black entrepreneurs have been left behind in many cases. African entrepreneurs have described their experiences in conducting business with Silicon Valley investors as condescending.

“There are a lot of systemic issues as a Black founder raising money abroad,” said 28-year-old Ghanaian startup founder Jesse Ghansah to The Guardian. Ghansah received an email from a San Francisco investor that read: “Sorry for asking, but do you understand that the money belongs to the company and is not your personal fund?” implying that he might steal the investor’s contributions.

“If I was white, my idea would have been taken at face value. But because I’m Black, I need to go the extra mile, I need to make sure that my education level is right, that my product actually does what I say it does,” South African technologist Nomahlubi Nazo told the British outlet.

Following the global reckoning with racial inequality after the deaths of Black people killed at the hands of police, investors began to intentionally seek out African-led startups to provide funding. However, some Black entrepreneurs were suspicious of investors’ intentions. Twitter user @ArlanWasHere, the founder of a progressive investment firm called Backstage Capital, expressed her frustrations on social media.

Some firms have called for investors to be intentional about identifying more diverse startups during the deal-sourcing process in order to bridge the gap between local and expat-led startup investment funding.

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