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Influential startup Y Combinator had huge success in Africa in 2020 when it highlighted the market and began accepting startups from the region into its groups. This was a huge step: in this emerging market, startups especially rely on programs like this to get their footing and connect with investors, and YC is the platinum standard for this process.
But fast forward to today, and that interest is starting to look a bit fickle. These days he pursues YC Big problems In areas such as manufacturing, defense and climate, it has quietly reduced its focus on developing markets. However, in Africa, some are seizing this opportunity. Local business accelerators – backed by young African graduates – are emerging to fill this gap.
The new wave of accelerators comes at the same time that the model favored by legacy local startup accelerators is changing. Co-creation HUB (CcHub), Flat6Labs, Baobab Network and MEST Africa have been funding companies for years alongside global accelerators, providing a pipeline of startups to major investors, including foreign investors, during the venture boom. Now with foreign investors pulling out, it has forced local players to rethink how to leverage and grow startups on the continent.
“My opinion is that instead of blocking out US companies (which don’t care about Africa anyway and were just opportunists), the community should come together to programmatically fund a sub-$1M pipeline just like Techstars, YC and 500 Startups,” wrote Eyinoluwa Aboyeji, co-founder. For Flutterwave, powered by YC, in LinkedIn recently.
Accelerate AfricaThe Aboyeji Initiative, launched by Aboyeji, is one such initiative. With 20 startups already in its portfolio, the year-old accelerator sprang from an internal program at Future Africa, Aboyeji’s venture capital firm (where he was another co-founder of Accelerate Africa, Mia von Koschitzki Kimani(He is also a partner.)
Aboyeji’s ambition is to become an “African Communist Council” – which is simply described, if not simply implemented.
Indeed, African startups are currently at a crossroads. Successful African founders who have gone through YC are unequivocal about the value of choosing programs with an international reputation.
“Everyone who knows me has heard me say: The YC in Africa is the YC,” Aboyeje, who also founded SoftBank-backed Andela, said in a recent interview. “This is my response when someone mentions joining an accelerator program. I always tell them: ‘YC is the standard and let me help you prepare your pitch so you can apply there.’”
However, the truth is that no African startup made it to Y Combinator’s final summer push; The previous three batches included only three startups from the continent. Contrast this with previous years, when the Summer 2021 batch had 10 African startups, the Winter 2022 batch had 23 companies, and the Summer 2022 batch had 8 companies (and the number of distant COVID-19 years was even more).
YC’s approach isn’t just changing because what it’s looking for has changed: it’s also reduced the size of its post-pandemic cohorts since 2022 (when at its peak it had 400 startups in one batch), and has reverted back to a year-to-person, where international founders In turn, they are more vulnerable to stricter US visa policies. Startups in Latin America and India also saw significant declines in acceptance.
“YC has and will continue to fund startups and founders from all over the world, including Africa. During the coronavirus pushes, we have been funding global companies via Zoom,” a YC spokesperson told TechCrunch. “Today, we are asking all startups to At YC moving to San Francisco, which naturally changed the composition of startups that apply to YC. We remain interested in speaking with and welcoming applications from the best startups around the world.”
Prioritize local capital, partners and public markets
Foreign financing, which includes venture capital firms and development finance institutions, typically accounts for about 77% of total project financing in Africa over the past decade, according to a World Bank report. African Private Capital AssociationTherefore, the decline in foreign interest had a direct impact on the amount of money invested in Africa. She said the first half of 2024 saw an overall decline in the value of startup investments by a staggering 65% compared to the previous year.
Aboyeji believes that startups in Africa have two ways forward: continue to rely on external sources of funding (and hope they return); Or take bold steps to build a local capital base.
“It starts with a group of exceptional early-stage startups that the ecosystem and larger companies have access to, and then it builds up from there,” Aboyeji said, referring to his experience watching Eric Migicowski, a friend and founder of Beeper and Peeble, get involved in the early days. To the accelerator: “I can say this with confidence because I watched it happen when YC was built. “I watched YC build, grow, and become what it is today.” “I think to myself that it is possible to do it here.”
Some venture capital firms such as Orange Ventures – linked to the French telecom company – exist, but local firms have yet to embrace the venture asset class en masse.
The goal of the Africa Accelerator is to create partnerships between its portfolio companies, local banks, telecom companies and others, not only through direct equity investments, but through mentorship, resources and services. Her goal is to have $1 million in revenue for her portfolio companies.
“We work closely with these companies to create exit paths and help our companies solve problems unique to their markets rather than imitating Silicon Valley’s financing model,” Aboyeji said.
there We are Large Africa-focused funds such as Partech Africa, Norsken22, Algebra Ventures and Al Mada. Together, these initiatives have raised nearly $1 billion for investment on the continent, but have not yet been widely rolled out. Building stronger companies at an early stage will bring more of them around the table with these big investors.
There is still the issue of exits. Technology company listings in local African markets remain rare, with only two startups – Flutterwave and Interswitch – currently floating the idea of IPOs.
There is artificial intelligence in Africa too.
Besides investor appetite, African startups face a different problem: they are outdated.
Generative AI is currently the hottest trend in technology, but Africa and other emerging markets have so far lagged behind their Western counterparts across North America and Europe when it comes to building AI startups. Interestingly, more than half of the 92 African companies that were through YC focused on fintech – YC’s top sector before the AI boom.
CDIAL.AI, an Accelerate Africa portfolio company, is building conversational AI that understands and speaks African languages fluently. Represents startup One of the few efforts from the continent and underrepresented communities to join the global generative AI discourse.
There is now an accelerator in Nigeria that aims to reverse this trend.
Go Time Artificial IntelligenceBased in Lagos, it targets founders developing AI products in Africa. Using Nigeria as its launching pad, its group includes five startups.
GoTime AI is a brainchild Olugbenga Agboolaanother co-founder and CEO of Flutterwave, via his early-stage venture capital firm and studio Resilience17 (R17).
“Artificial Intelligence is the most influential global trend to emerge in the past 20 years since the advent of the mobile phone,” Hassan LunguThe general partner at R17 told TechCrunch in an interview. “It’s still early days, so we want to push that engine forward. It’s not like copy and paste from YC, but it’s simply a realization that it’s not just Silicon Valley that’s passionate about AI.
This highlights an interesting shift. In the past, leading startups in emerging markets have succeeded by copying Silicon Valley models and tailoring them to fit regional needs in sectors such as fintech, logistics, and healthtech. On the other hand, it is undeniable that AI is a global game, like software as a service (SaaS) – it represents a challenge but also an opportunity.
Longo, who is leading the GoTime AI effort, believes Africa has an opportunity to build AI products at a lower cost than Western markets, which could make AI startups here more attractive to acquirers, especially since they require lower valuations.
“That’s our bet – they are will Measure up. “We are betting that the talent here will be on par with, or even better than, those in other countries, while benefiting from lower costs of operations,” Longo said. “Also, companies here probably don’t have high valuations, so global companies will probably be able to pick them up for a lower cost, but still get great talent and their products.”
Pipeline repair: check or not?
Unlike Accelerate Africa, GoTime AI does not aim to be the next YC on the continent. Instead, the accelerator positions itself as a springboard for AI startups to gain access to opportunities from early-stage investors.
The accelerator plans to expand its program across Africa and scale it to accept 15 to 20 startups per cohort, depending on the success of the inaugural cohort in Nigeria.
AI applications for legal, compliance and sales/customer relationship management – trends also seen in YC’s recent pushes – are emerging in the GoTime AI and Accelerate Africa portfolios. Both accelerators start with two cohorts per year, although their deal structures differ significantly.
GoTime AI invests up to $200,000 for 8% equity, divided into $25,000 upfront, $75,000 on demo day, and $100,000 in the startup’s first fundraising campaign. The accelerator also offers mentorship to startups, workspaces, application programming interface (API) access and cloud computing credits to train AI models and test products.
Accelerate Africa, which is currently operating with an endowment of less than $1 million, does not offer upfront funding or take equity upon acceptance.
“The benefit of these first two groups is storytelling, the halo effect, and community, not money. Once the money comes in, we will likely change the model.” Ogie Odizoan investment partner at Accelerate Africa, told TechCrunch about the accelerator’s decision not to provide funding to its startups. Alternatively, its sister fund, Future Africa, may co-invest between $250,000 and $500,000 after the program through its standard investment process.
Despite not offering upfront funding, Accelerate Africa boasts an acceptance rate of 1.4% and claims to have helped startups in its first cohort raise more than $5 million. “We have a quality bar; we don’t want to build an accelerator that is no better than YC in Africa.
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