by Lionesses of Africa Operations Department
As we write this the Olympics is moving into its second week, and African athletes are starting to lengthen their stride and impact more of the medal table. With such a fabulously varied and diversified continent, it is fascinating to note the way the medals flow from the south as we move from Swimming (Tatjana Smith setting the pool alight!) and 100 metres track (with both South Africa and Botswana in the final), up and into the Kenyan and Ethiopian dominance of middle and long distance running. Dominance it is too as Kenya took Gold and Silver in the 5000 metres (take a massive bow Beatrice Chebet - Gold, and Faith Kipyegon - Silver) and in the Men’s 10,000 track Uganda took an incredible Gold with a new World Record through the power that is Joshua Cheptegei, with Eithopia’s Berihu Aregawi just behind.
As if to confirm our new home in the Netherlands to bring the EU to the Lionesses and Lionesses to the EU, the wonderful Ethiopian-born Sifan Hassan running for her home Netherlands, took Bronze. This is the same Sifan Hassan who ran the 1,500m, 5,000m and 10,000 metres at the Tokyo Games and picked up three medals including two golds, and who, just to spice it up this Olympics is running the 5,000m, 10,000m, and marathon in Paris (a mere 62.2km of running over 10 days). Truly a Lioness of Africa!
Almost to ensure that the south of Africa was not forgotten as the second week continued (and as we are writing this), the 200 metres track was won by the incredible Letsile Tebogo of Botswana! Is Africa starting to find its stride in the short distances too? Look out USA!
With such incredible diversification on show from across Africa, we have to ask, what is it about diversification that frightens so many? Not just across our great continent, but also in the USA, specialists like the ‘Pummel Horse Guy’ who on paper should never have been picked as a Gymnast for such an event at the Olympics, suffering as he does from no depth perception and highly sensitive to light, due to being born with Coloboma and Strabismus. His eye conditions have even prevented him from having a driver's license, yet someone somewhere in the USA saw huge potential in him, invested time and money, and then let him loose. Fast forward many years and he puts down his glasses and Rubik’s Cube (how he prepares for massive events - personal record of 8.664 seconds if you are interested), reaches for the Pummel Horse, and nails it, taking his whole team to the podium. This ability for experts in their field (to say nothing of different thinking), to drive their Team forward has to be celebrated.
Diversification is a central theme to finance as well. Pension funds love telling us that diversification is the key to a well balanced fund for our futures, yet, not so much interest it seems from many of the VC funds who prefer ‘warmed introductions’. Warmed introductions are when someone you know recommends others that they know, which by definition significantly reduces the amount of companies you will see from a group outside of your own group. If you are only then picking from a small pool of potentials, this leaves a huge pool of potential big fish ignored.
Add to this the fact that there are so few women investors who might have a different set of connections and it’s no real surprise that only 2% of funding goes to women-owned businesses (see Pitchbook). In Europe it is also 2% (see here), there is clearly a correlation and without doubt causation between the amount of capital in the hands of female investors and the resultant cash that reaches women-founded companies. In Africa no different, the 2% level is there for all to see (see the latest from Africa: The Big Deal - just look for that large 98% number representing the amount that flows to companies with at least one male founder) and as far as female fund managers go across Africa, we have on speed dial probably 80% of them (which is sadly not saying much as there are sadly so few of them), a mere fraction of the total male VC Investors.
Bank funding also follows this trend for female-owned businesses where: “…it is estimated that they only access between 2 and 10 percent of commercial bank finance. This holds true in emerging markets, where women-owned firms represent 31 percent to 38 percent of all small and medium enterprises (SMEs), but have unmet financial needs close to $300 billion every year.”, according to the World Bank (here), which seems a bit strange to us given the huge amounts flowing into banks with a ‘2X’ stamp of approval. Clearly criteria no.1 ‘Entrepreneurship and Ownership’ is not as easy as it sounds - but what do we know? We only have 1.8 million members who tick that box…
The bottom line according to Gary Sanger, PhD, CFA (here) is that, “…a well-diversified portfolio reduces risk without sacrificing returns [something many of our Lionesses VC investors are proving with Impact plus increased ROI - just saying]. The key to efficient diversification is combining asset classes that have low correlations. Finally, adding asset classes that are highly correlated with those already in the portfolio is redundant, achieving little benefit and adding to costs.”
In the excellent Netflix film called “Knock Down the House”, that went behind the political scenes as four inspirational women tried to break through the male and money-dominated wall, including Alexandria Ocasio-Cortez (‘AOC’), and were filmed challenging big-money politicians in the 2018 race for the USA Congress. One part, in particular, stood out for us, the fact that big (corporate) money and well-connected politicians controlled the power, to such an extent that no one could go against them, including in Queens NY where their sitting congressman actually lived with his family in Virginia. Indeed in one clip, a voter joked that they only see him when there is an election due! Still, no problems, they with their big business backers controlled the power and especially the local power.
This local power creates strong gatekeepers, which means that should anyone be daft enough to attempt to run against them, their applications to even go on the ballot become almost impossible. These are deeply scrutinised and held up over the tiniest of errors. As Jo-Ann Floyd-Whitehead, the community organiser in Queens NY (thank goodness for such servants of the people) stated: “Those who are already entrenched, select people. It’s going up against the establishment in a true sense of the word. So you have to make sure you have as much stuff in order as possible.”
“Those who are already entrenched, select people.”
This hit us because it is exactly what we see when we hear of VC funds only wanting to see and review ‘warmed introductions’, or only businesses that have been through particular accelerators that feed many of the top funds, and so from this small pool will be a smaller pool still, accepted into investment committee stage.
In addition, as Netflix showed, anything slightly out of order and these ‘gate-keepers’ will slow your application down until the very last minute, so you cannot go out to canvass for votes, you are stuck explaining why so many signatures of people who supported your application were slightly out of place (for example). This is why when Lionesses come to us to ask our advice our first look is at their paperwork. This is where the quickest “No’s!” for investment or funding come from. Get your house in order, get your paperwork done, check your IP ownership, get your corporate governance to a high level, leave nothing to chance, is what we say time and time again because it is difficult enough to get in front of VC Investors (and banks), why leave anything to chance?
Sadly, somehow we need to break through this wall in business and finance, to create a level playing field from which women’s businesses can grow and thrive whilst delivering the socioeconomic transformation that they bring. As the Cherie Blair Foundation say here: “An increase in the number of women-owned MSMEs won’t close the economic gender gap alone – but women entrepreneurs often prioritise community and social impact. Their businesses tend to create jobs and provide opportunities in local communities, particularly for other women. Women entrepreneurs are also more likely to reinvest profits into their communities and social initiatives that uplift girls and women. What’s more, The World Bank estimates that closing the gender gap in employment and entrepreneurship could increase global GDP by more than 20%.”
Proving that one can diversify with Impact and still give a serious ROI, we listened to the release of Dr Ola Brown’s HealthCap Impact report recently (see here). Not only were her results strong, her impact inspirational, but her portfolio companies collectively raised nearly $100 million in follow-on funding, which at a time when ‘exits’ (which fuel the VC and PE world) are so difficult, speaks volumes about the quality of her portfolio and the way she builds these businesses into the next stage of growth.
As Rebecca Eliot the founder of ProTouch™️ Africa, who is passionate about supporting athletes across Africa through support and funding says (here): “As Africans across the continent, the diaspora, and the world at large celebrate Botswana phenom, Letsile Tebogo’s 🇧🇼stunning victory in the Men's 200 meters at the 2024 Olympic Games, the significance of this achievement cannot be overstated. Triumphing over Noah Lyles a formidable favorite, Tebogo's triumph underscores a message that some have championed for years: the need to grow and develop the sports space in Africa as a powerful vehicle for socioeconomic transformation.”
Adding: “Tebogo's victory is a clarion call for stakeholders to fully commit to nurturing and developing the sports sector in Africa, turning it into a cornerstone of opportunity and growth for generations to come…”.
So too with finance and women’s businesses…
Stay safe.