The moral arc of creative disruption bends towards demand and supply, in the common good. With the right incentives, resources incline towards people who can capitalize on opportunities. 

Iterate this process enough and you create structures that reproduce growth and economic development.

That’s a good theory of how prosperity happens, but it assumes that society is founded on rational actors interacting on a level playing field. In reality, the modern world as we know it is a consequence of historic inequalities.

For better and worse, humans do not allocate productive resources in a vacuum. Consciously or not, choices are products of values formed over time.

Bias for the white pitch

“Investors pattern match. They look for signals of trust. Social proof is a key metaphor for trust. This carries across borders,” Eghosa Omoigui, managing partner at EchoVC Partners, says to TechCabal.

Pattern matching produces biases – conscious and unconscious inclinations that feel safe, but may undercut the range of possibilities we want to countenance. Venture capital in Africa has this problem evinced by the type of founder investors have become more likely to fund.

In 2019, 17 companies raised $1 million or more from venture capital in Kenya.  4 were founded by a mix of expats and Africans, 11 by expats only, only 1 by locals.

Of the 31 companies in other countries (outside Nigeria and South Africa) that raised $1 million or more, 14 were founded by expats, 10 by locals, and 7 by a mix of both.

“The data is disappointing but the truth is there is bias. The question is what reasons can be attributed,” Omoigui says.

The unvarnished assessment of many commentators is that racism is afoot. 

Roble Musse, whose finding and blog post in February has been cited as evidence in many discussions, thinks so. Black entrepreneurs on the continent are convinced some of the condescension and humiliation they have faced with white founders has much to do with the color of their skin.

The fault here does not lie with the expats being funded. Companies like Sokowatch and Twiga Foods and PayGo Energy are channeling VC money to innovative solutions tailored to African realities.

Yet, opinion is converging on the need to challenge a North American lens that judges African innovation through the white pitch.

Swaady Martin, an Ivorian entrepreneur, believes funding bias in favor of African businesses founded by non-Africans “is another form of neo-colonialism.” 

“It’s a form of exploitation and is fed on white supremacy, white centering and white privilege, unconscious biases which have been institutionalized since the 15th century.”

After an eleven-year career at General Electric helping expand its business portfolio in Africa, Martin founded YSWARA; a South African gourmet tea company that sources ingredients across Africa and exports to 17 countries around the world.

Despite her network, professional achievement and sector knowledge, Martin says she has been unable to raise funding for the company. 

But she continues to see capital cycle from white funders to white founders in ways that mimic the transfer of World Bank loans from Washington institutions to Africa-based NGOs led by white people.

The crucial lede from Musse is that expat founders who receive more funding in Africa may not be more educated or experienced than black Africans. The dynamic perpetuates “the image of Westerners as superior, giving more of Africa’s resources to non-Africans,” Martin says.

The compatibility argument

Thanks to its large community of expatriates, Kenya remains the reference on this subject. Ada Osakwe, a Nigerian agro-entrepreneur and angel investor, describes it as the “soft landing pad” for foreigners who want to become African entrepreneurs.

When foreign investors look to fund African companies there, they are drawn to these expats, assuming them to be capable and experienced. 

This reading of the problem suggests that having Africans at decision-making levels in funding organisations will favor the continent’s black entrepreneurs.

But even ostensibly African-led funds inadvertently relegate black founders to the background, prioritizing compatibility over color. 

“You should ask how many Black investors in the US have funded Black founders,” Omoigui, who worked at US-based Intel Capital before founding EchoVC, says.  

“There is an argument for ‘you fund those you see’ but the truth is ‘you fund those you think will build unicorns’.” 

A workable VC-founder relationship goes beyond money. It is a contract laden with clauses for preferential treatment in times of big decision-making like changes in valuation, liquidations and exits. 

For the VC, they want to enter this short term relationship as clear-eyed as possible, safe in the knowledge that, should the project fall through midway, there will be little friction getting whatever remains up for grabs.

That said, VCs may be inclined to lean into this compatibility argument as justification for not doing enough to fund companies founded by people whose worldview they are not familiar with, i.e. black-founded companies. 


A version of this, for example, is that when some African founders take very early money from local angel investors, they create a predatory cap table that discourages subsequent investors.

On the other hand, Africa-based expat founders would not fall into a similar trap because of the wider network of investors available to them. 

“It is an unfortunate narrative we advance about African angel investors when other investors do the same,” Olu Verheijen, an African angel investor and former partner at Persistent, a Swiss-based venture building and early stage company, says to TechCabal.

Incumbent and prospective investors can always resolve issues around a startup’s cap table by engaging in constructive discussions, agreeing on more balanced terms to align incentives and position the company for growth, she says. 

In any case, deal terms shouldn’t overshadow the main reason for impact investing. 

At core, impact investors should focus on “the overall goal of growing a resilient middle class of Africans through their investments so we can lift more people out of poverty in meaningful ways on the path of prosperity,” Verheijen says.

But how do you get investors to combine the profit motive with diversity?

Nudges or shoves

VCs simply have to create structures that attract diverse deals to the table.

“When one group is overrepresented at the table, you are likely to see that reflected in your investment pipeline and portfolio,” Verheijen says.

“Diversify every level of investment decision making,” from deal origination units to general partners “and we should see a diversified outcome.”

Musse would like to see greater adoption of revenue-based investing models and less reliance on venture capital.

“I’m not saying there isn’t a role for VCs in the African tech ecosystem, [but we should] explore alternative funding models that are more patient and can profitably invest in niche ideas that address local problems,” he says to TechCabal. 

While revenue-based investing is a potential alternative, businesses in the growth phase experience constant cash flow worries that will continue to make venture capital necessary, according to Claire Hoey, a British investment advisor based in South Africa.

And for the foreseeable future, foreign VC money will continue to thumb the scale, making attention to how it flows inevitable.

According to the Africa Venture Capital Association, venture firms headquartered in North America were responsible for 42% of VC deals in Africa in the last five years, with 20% coming from Africa-based firms.

To the extent that they remain influential in who and what gets funded, foreign investors need to re-calibrate their thinking around transferring Silicon Valley deal-making patterns to Africa, Hoey says:

“You’re going to have to be guided by the understanding of the local entrepreneur in terms of market dynamics and opportunities.”

This change in approach involves a willingness to look beyond PowerPoint decks and economic models to focus on substance over form, according to Sele Inegbedion, manager for All On Hub, a Nigeria-based renewable energy venture capital firm.

“Indigenous founders have the advantage of understanding their local market better than foreign entrepreneurs. The vested interest of indigenous founders is also more likely to be sustained in the longer term,” Inegbedion says.

Martin, the Ivorian founder of YSWARA, doesn’t expect that VCs will sufficiently adjust their mindsets by themselves. She wants to go much further. 

Her three-prong plan is to mandate that a minimum of 60% of VC deals be channeled to African founders; require non-African founders to give some equity to a fund supporting local entrepreneurs; and for Africans to invest in Africa.

There is broad agreement on her third suggestion; African high networth individuals have yet to take up an active interest in the continent’s venture capital space.

The Africa Development Bank has set up a fund called Boost Africa in partnership with the European Infrastructure Bank. Aimed at “empowering young African entrepreneurs” startups, the initiative will fund up to 30 funds over an 8 year period. 

It is unclear at the moment which funds have been funded so far as there is no public record.

But affirmative action or positive discrimination may be a hard sell.

“I don’t think it’s fair. Money should follow returns freely,” Osakwe says. “Instead, my government should create an environment that allows us to thrive.”

She argues that while it is good to raise awareness on bias, Africa’s future lies in being able to determine its destiny. “People fund those who look like them. The only way we can crack this is when we start being the providers of capital.”

There’s also the notion that with more successes on the continent, the world will come around to seeking out Africans on Africa’s terms rather than determining the continent’s fate. 

“Africa isn’t so unusual that foreign capital won’t find its way here either through local or foreign founders,” Omoigui says.

Alexander Onukwue Author

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