African startups backed by Google for Startups’ Black Founders Fund are making funding headway, collectively raising USD 266 M from venture capitalists (VCs) in the last three years. This positive trend is revealed in a new report by Google for Startups and VC firm Notion Capital, which analyses the initiative’s impact across Africa and Europe.
The Black Founders Fund provides startups with a significant boost, offering USD 100 K in cash awards with no equity stake required. Additionally, each company receives up to USD 200 K in Google Cloud credits. This financial support is coupled with ongoing mentorship from Google experts, along with product support to help navigate the challenges of running a startup.
The Google for Startups Black Founders Fund was established in 2021 to support Black entrepreneurs and address the longstanding disparities they face in accessing capital and resources. Since then, Google said the Fund has supported 220 European and African companies, comprising 135 from Africa and 85 from Europe.
In 2022, the program’s reach expanded in Africa. Out of the 60 African startups selected for the second cohort, 23 were from Nigeria, the continent’s dominant tech market in recent years. These included promising startups such as Eden Life, Estate Intel, Healthtracka, Haul247, and Flexfinance.
However, the report also highlights persistent disparities in access to capital for Black founders.
Funding Successes and Job Creation
The report details that startups in Europe backed by the Black Founders Fund secured $91 million from VCs. This brings the total raised by both African and European startups to USD 379 M, considering the initial USD 100 K investments from Google.
Beyond funding, the Black Founders Fund has demonstrably bolstered job creation. Companies within the program now employ over 6,000 individuals, a staggering increase from just 902 in 2021. Notably, African Black Founders Fund companies currently employ over 4,059 people, reflecting a more than four-fold increase since the fund’s launch.
Outperformance But Unequal Landscape
The report underscores that Black Founders Fund companies are exceeding expectations, achieving an average growth rate 61% faster than their peers at a similar stage.
This achievement comes against the backdrop of a significant funding gap for Black founders. “Since 2000, only USD 2.5 B has been invested into Black-led tech businesses across Europe and Africa,” the report states. This seemingly substantial figure translates to a mere 0.51% of the total capital invested in all startups within the region.
The report breaks this down further, revealing that in Europe, just 0.43% of all investments went to Black-led startups (USD 2.09 B out of USD 482.5 B), and in Africa, that number is 3.11% (USD 413 M out of USD 13.3 B).
Bridging the Gap: Policy and Education
The report emphasises the need for collaboration between stakeholders in the startup ecosystem. It recommends working with policymakers to advocate for policies that incentivize diversity within the tech sector and dismantle systemic barriers faced by Black founders seeking funding.
Educating investors about unconscious biases and the challenges faced by underrepresented founders is another crucial step, as highlighted in the report. This can foster a more inclusive investment landscape where Black founders have a fairer shot at securing capital.
Building a Supportive Community
The report underscores the importance of strengthening community-building initiatives. Creating a supportive ecosystem where Black founders can connect, collaborate, and share experiences is essential for their success.
While Google for Startups’ Black Founders Fund is demonstrably making an impact, the report acknowledges the persistent funding gap for Black founders in Africa and Europe.
It is suggested that by implementing the recommendations outlined in the report, stakeholders can work towards a more equitable tech ecosystem that unlocks the full potential of Black-led startups.