From PC Advisor:

The perceived challenges of businesses operating in Africa as well as the higher costs of due diligence and inexperience of the investors and entrepreneurs in the region have all worked to dampen the growth of venture capital funding for tech startups and mid-level businesses on the continent, according to industry insiders.

Many venture capitalists and angel investors in tech are based outside the continent, mainly in Silicon Valley, where there is a scarcity of information about whether the challenges of doing business in Africa have changed in the last few years. Because of this, investors tend to trust startups and businesses led by entrepreneurs with Western ties, rather than local entrepreneurs.

“Many Kenyans who are graduates from Stanford or Harvard have an easier time raising funds compared to others who didn’t school in prestigious Western universities,” said Erik Hersman, founder of the iHub Nairobi, a co-working space for techies.

Local startups have held discussions and wondered whether their lack of success in raising big money had racial overtones, the idea being that companies run by whites seem to be luckier in securing funds. The problem, however, seems to be more about the perception of inexperience and a lack of contacts than race.

Written by Rebecca Wanjiku | Read more at PC Advisor