Venture capital funding in Africa: a mixed-methods study of evolving ecosystems and financial discrimination

Christian Kabengele and Rüdiger Hahn ()
Additional contact information
Christian Kabengele: Heinrich Heine University of Düsseldorf
Rüdiger Hahn: Heinrich Heine University of Düsseldorf

Journal of International Business Studies, 2025, vol. 56, issue 6, No 6, 777-794

Abstract: Abstract Africa’s startup ecosystem is growing rapidly, yet venture capital (VC) funding remains disproportionately allocated to non-African founders. This study investigates the factors driving this disparity, focusing on institutional voids – gaps in legal frameworks, financial infrastructure, and market-supporting institutions – and investors’ perceptions of risk and financial discrimination. We conducted 37 interviews with investors and entrepreneurs to identify the determinants of VC funding, including startup location, founder origin, and international networks. Additionally, a qualitative comparative analysis of 335 African fintech startups revealed the factor configurations that enable startups to secure high levels of VC investment. Historically, the findings reveal that non-African founders have benefited from investor homophily, a preference for investing in individuals with similar backgrounds, to mitigate the perceived risks related to institutional voids. By contrast, African founders faced greater barriers to funding. However, as Africa’s VC ecosystem has matured, local founders have begun to overcome these obstacles. By linking institutional voids to homophily and embedding a postcolonial perspective, acknowledging how historical power dynamics and colonial legacies shape investor perceptions and market structures, this study sheds light on the systemic biases that shape VC funding. These findings offer actionable insights for investors, policymakers, and entrepreneurs aiming to foster a more inclusive VC landscape.

Keywords: Venture capital; Africa; Institutional theory; Homophily; Emerging markets; Mixed-methods approach; Qualitative comparative analysis (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41267-025-00788-w Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:56:y:2025:i:6:d:10.1057_s41267-025-00788-w

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

DOI: 10.1057/s41267-025-00788-w

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().