Why there is a massive gender funding gap in Africa and across the world
Female-led startups continue to struggle to raise as much money as their male counterparts, which has far-reaching implications for the industry, despite efforts to address this issue.
The tech industry has been experiencing significant growth over the years, with new startups emerging every day. However, a persistent challenge continues to hinder diversity in the sector: the gender funding gap.
Despite efforts to address this issue, female-led startups continue to struggle to raise as much money as their male counterparts, which has far-reaching implications for the industry.
For instance, data from DealStreetAsia reveals that female-founded startups in Southeast Asia raised only $2 billion in equity funding in 2022, representing a 32% decline from the previous year. This accounted for just 12.6% of all private capital raised, highlighting a significant disparity in funding allocation.
This trend is not unique to Southeast Asia, as female-led ventures in other regions face similar challenges. In the MENA region, women-founded startups attracted a mere 1.3% of the $3.94 billion raised in 2022. Meanwhile, in Africa, male-led startups received a disproportionate 96% ($4.6bn) of the total volume, leaving female-led ventures with a meagre 4% ($188m).
The underfunding of women-led businesses is a troubling issue, as a report by BCG shows that they ultimately deliver higher revenue than those founded by men. Moreover, startups founded and co-founded by women generate significantly better returns on investment, with female-led companies developing 78 cents for every dollar of funding. In comparison, male-founded startups generate just 31 cents. Investing in women-led businesses is a smart move, both financially and ethically.
Is there a solution to the gender funding gap?
The gender funding gap can be attributed to several factors, including bias in funding decisions, a lack of diversity in venture capital firms, and limited access to networks and resources. Addressing these issues and creating a more inclusive and equitable funding environment is imperative. One way to do this is by promoting more diverse venture capital firms and investors who recognize the value of investing in women-led businesses.
Another solution is to create programs and initiatives that support women-led businesses, such as mentorship programs, accelerator programs, and grants. These programs can provide women entrepreneurs with the resources and networks needed to succeed in the tech industry.
As the world marked this year's International Women's Day on March 8, it is crucial to recognize the importance of investing in women-led businesses as bridging the funding gap can drive innovation, promote economic growth, and create a more equitable society. The tech industry must take action to address the gender funding gap and support female entrepreneurs, as the benefits of diversity are clear.
The rest of this week's edition of The Draft continues below, featuring company layoffs, new product releases, acquisitions, startup funding, and mobile industry insights.
To a more inclusive and equitable ecosystem.
– Yeb
