Silicon Valley has deep pockets for African startups – if you’re not African
“Sorry for asking, but do you understand that the money belongs to the company and is not your personal fund?”
When Jesse Ghansah saw this question in an email from a prominent white investor in San Francisco while fundraising for his first startup four years ago, he refused the deal.
The 28-year-old Ghanaian entrepreneur, whose business is in Ghana, and his co-founder found it condescending when they were already in Silicon Valley’s prestigious startup development program Y Combinator. “I really doubt that a white founder would be asked the same. There are a lot of systemic issues as a black founder raising money abroad,” he says.
His experience is not uncommon. While many were wary of speaking publicly, African entrepreneurs told the Guardian about humiliation, discrimination, stereotyping and sometimes racism that they endure in interactions with some of the world’s most prominent investors.
North America-headquartered investors accounted for 42% of all African venture capital deals in the last five years, according to the African Private Equity and Venture Capital Association. Only 20% of venture cash came from Africa-based investors, forcing the continent’s entrepreneurs to seek support from westerners.
Of the top 10 African-based startups that received the highest amount of venture capital in Africa last year, eight were led by foreigners, the Guardian’s analysis of public data revealed.
In Kenya, for instance, only 6% of startups that received more than $1m in 2019 were led by locals, a Viktoria Ventures analysis found. In Nigeria, 55% of the big money deals went to local founders and 56% for South Africa.
Global heavyweights such as Goldman Sachs, Stanford University, Chan Zuckerberg Initiative, Andreessen Horowitz and Sequoia Capital have all invested in startups started by white founders in Africa more frequently than they have invested in firms led by black Africans.
White privilege
Advantages that white entrepreneurs have include having a safety net to take time off to travel to Africa, backgrounds in elite education and better access to US-dominated funding funnels.
“It’s obvious that I come from a privileged standpoint,” says Matt Flannery, a white American behind two Africa-facing startups, Kiva and Branch International, which have collectively raised more than $270m, according to the industry website Crunchbase. “I grew up in a relatively wealthy place, I went to Stanford University, I live in the Bay Area. I have dozens of venture capitalists as friends, and obviously that helped me raise money,” he told the Guardian from his home town in
Oregon.
Flannery said he has always been concerned about the funding gap in Africa and is working to expand access to financing for African entrepreneurs. Across the east African region, only 10% of all funding for startups went to local founders, according to a 2017 study by Village Capital.
One exemplar is Twiga Foods, a seven-year-old startup that connects food producers and vendors to markets that has raised $67m. It was co-founded by Peter Njonjo, a Kenyan who was a senior Coca-Cola executive and an Ox