The powerful isiZulu saying, “Wathinta abafazi, wathint’ imbokodo” – “You strike a woman, you strike a rock” embodies the strength and resilience of women. This spirit is increasingly evident in the world of venture capital (VC), where women are making significant strides despite persistent challenges.
The venture capital landscape, long dominated by men, is experiencing a notable shift. As more women enter VC and rise to leadership positions, they’re not just breaking barriers; they’re bringing fresh perspectives and driving positive change in the industry. However, the road to equality remains long and winding.
Current state and challenges
According to recent data from the Organisation for Economic Co-operation and Development, women founders receive less than 7% of all venture capital investments in Africa, despite making up around 20% of founders.
The continent boasts the highest proportion of women entrepreneurs globally, with more than a quarter of all businesses either started or run by women. This is in stark contrast to Europe, where the rate of entrepreneurial activity among women is just 5.7%. Despite this entrepreneurial spirit, African women face significant funding challenges.
This disparity isn’t unique to Africa; it’s a global issue that underscores the systemic challenges women face in accessing capital. In the US, women represented 14% of solo startup founders in 2021 but received just 2% of VC funding. The picture is even worse in Europe, where women account for 14% of startup founders but received less than 1% of total VC funding.
Women in VC encounter numerous obstacles, including underrepresentation at partner levels, bias in fundraising processes, and limited access to crucial networks. Many female founders are locked out of critical networks where ‘the deals are getting done’. This exclusion perpetuates a cycle of disadvantage, making it harder for women to secure funding and build successful ventures.
The power of diversity
Despite these challenges, the presence of women in VC is proving to be a game-changer. Diverse perspectives lead to more well-rounded investment decisions and expanded opportunities. VC firms with women partners are more likely to invest in women-led startups, creating a ripple effect of empowerment throughout the ecosystem.
Interestingly, women entrepreneurs are less likely to give up their businesses than their male counterparts, making them potentially more viable investments. This fact underscores the economic imperative of inclusivity in venture capital.
Initiatives for inclusion
The VC industry is gradually recognising the value of diversity and taking steps to be more inclusive. Organisations like Seed Academy are addressing the unique challenges faced by women entrepreneurs. Their holistic programs, which combine business training with personal development, equip women with the tools they need to build successful and scalable businesses.
This movement towards inclusivity is driven by the understanding that diverse perspectives fuel innovation. Women-led businesses are proving to be resilient and profitable, offering returns not just in financial terms but also in the broader positive impact on communities. By investing in women, the VC industry is not just closing a gap but unlocking a wealth of untapped potential.
The need for investor solutions
One explanation for the low investment in African women entrepreneurs is the lack of female representation among investors. The International Finance Corporation reported that as of 2019, just 12% of senior general partners in Sub-Saharan African private equity and venture capital firms were female. Globally, this number was even lower at 11%.
Growing the number of senior female figures in VC and private equity firms will be crucial to addressing gender bias among investors on the continent. Simultaneously, male investors must examine their own biases to ensure they make more of an effort to invest in female-owned businesses.
Investors can also take a more hands-on approach that extends beyond funding. By helping women entrepreneurs integrate into broader business networks, investors can support the scaling of these businesses. This approach creates a virtuous cycle where successful exits lead to more funding for women entrepreneurs, and women entrepreneurs eventually become investors themselves.
Looking ahead
The road to achieving true gender parity in venture capital is long, but the momentum is building. At Grovest, we’re committed to fostering diversity and inclusion in the alternative investment space. We believe that embracing diverse perspectives is key to identifying unique opportunities and delivering value to our investors. As we continue to innovate in the world of alternative assets, we’re proud to support and empower women in venture capital and beyond.
The spirit of “Wathinta abafazi, wathint’ imbokodo” reminds us that women in VC are resilient, powerful, and capable of transforming the industry. As we work towards a more inclusive and prosperous future in venture capital, let’s remember that investing in women isn’t just the right thing to do—it’s the smart thing to do for our economy and society as a whole.