African Startups Should Tokenize to Break Biased Funding

Locals from East Africa and Nigeria accuse "Wazungus," or outsiders, of perpetuating racially biased venture capital funding cycles, muddying the funding landscape for the real African founders.

One such jurisdiction is the U.S. state of Delaware, home to 70% of thousands of African startups incorporated outside the continent.

For every startup that comes up through its ranks, Y combinator dolls out $125,000 in return for 7% of the startups using a "Post-money" Simple Agreement for Future Equity.

A report in 2019 by U.S.-based Village Capital showed 90% of funding for East African startups went to expat founders.

Viktoria Ventures, based out of Nairobi, East Africa, found that only 6% of startups that received more than $1 million in 2019 in Kenya and East Africa were led by locals.

Expat founders continued to receive most of the funding in Ghana and Uganda as well.

Despite a lack of clear evidence that white founders are better at founding and growing startups than local black founders, or founders schooled locally versus abroad, statistics point to a bias in fund allocation.

Once startups can be traded as digital tokens, we can use crypto asset exchange infrastructure to create exit opportunities for early stage investors, or distribute opportunities to investors from around the world to try their luck at funding African startups.

SureRemit, a Nigerian remittance startup proved it was possible to tokenize access to capital, during the famed initial coin offering boom, an epoch in which more than 1,000 projects raised over $20 billion through tokenized funding.

The founders have since come under criticism from some disgruntled Nigerian investors over the CEO taking a break from running the company to further his studies, a declining token price struggling for liquidity and a utility token model that is yet to materialize.