Influential accelerator Y Combinator made headlines in Africa in 2020 when it shed light on the African market and started hosting local startups in the region. This movement was huge. In this nascent market, startups especially rely on programs like this to find their footing and connect with investors, and YC has become the platinum standard in that process.
Fast forward to today, however, and that attention is starting to look a little fickle. Lately, YC has been quietly reducing its focus on market development as it pursues big problems in areas such as manufacturing, defense, and climate. But some Africans see this as an opportunity. Local accelerators backed by none other than African YC alumni are emerging to fill the gap.
The new wave of accelerators is coming at the same time that the model favored by old local startup accelerators is changing. Co-creation HUB (CcHub), Flat6Labs, Baobab Network, and MEST Africa have been working with global accelerators to sow the seeds of companies for many years and have attracted large-scale investments, including from overseas investors, during the venture boom. It provided a startup pipeline for the house. Now, with foreign investors pulling out, local companies are being forced to rethink how they leverage and nurture startups on the continent.
“My opinion is that instead of shadowboxing American companies (which didn’t care about Africa anyway and were just being opportunistic), the community should do what Techstars, YC, and 500 startups do Unite programmers “We need to fund sub-$1 million pipelines in a smart way, and we've been doing that for years,” Iyinoluwa Aboyeji, co-founder of YC-backed Flutterwave, recently wrote on LinkedIn.
Accelerate Africa, founded by Aboyeji, is one such initiative. The one-year-old accelerator, which already includes 20 startups in its portfolio, is independent of the in-house program at Aboyeji's venture capital firm, Future Africa (another member of Accelerate Africa). Co-founder Mia von Kositzky-Kimani is also a partner).
Aboyeji’s ambition is to become the “YC of Africa”. It is simply explained, if not simply executed.
Indeed, African startups are currently at a crossroads. Successful African founders who have gone through YC are clear about the value of being selected for a program with international visibility.
“Everyone who knows me has heard me say, 'YC in Africa is YC,'” Aboyezi, who is also the founder of SoftBank-backed Andela, said in a recent interview. told TechCrunch. “When someone mentions joining an accelerator, I always respond to this. I always tell them, 'YC is the norm, so let me help you prepare your pitch so you can apply there.' Masu.”
But the reality is that there are no African startups in Y Combinator's latest summer batch. And in the previous three batches, there were only three startups each from the continent. This was followed by 10 African startups participating in the summer 2021 batch, 23 in winter 2022, and 8 in summer 2022 (fully remote COVID-19 year). Compare that to a few years ago (when there were even more startups).
YC's policy change is not just because of a change in what they are looking for. From 2022 onwards, the size of the post-pandemic cohort also decreased (at its peak, there were 400 startups in one batch) and back again in 2022. -Foreign founders are more susceptible to stricter US visa policies. Start-ups from Latin America and India have also seen a significant drop in acceptance.
“YC has and will continue to fund startups and founders around the world, including Africa. Due to COVID-19, we are funding global companies via Zoom. ,” a YC spokesperson told TechCrunch. “Today, we are requiring all YC startups to relocate to San Francisco, which necessarily changes the startup mix that applies to YC. We continue to talk to the best startups from around the world. We welcome applications from the best startups around the world.”
Prioritize local capital, partners and public markets
According to the African Private Capital Association, foreign funding, including venture capital and development finance institutions, typically accounted for about 77% of all venture funding in Africa over the past decade, so the decline in foreign interest has a direct impact on Africa. is giving. Amount invested in Africa. According to the report, the value of overall startup investments in the first half of 2024 fell by an astonishing 65% year-on-year.
Aboyeji believes there are two paths forward for African startups. One is to continue relying on outside funding sources (and hoping they come back). Or you can take bold steps to build your local capital base.
“It starts with and builds from a pipeline of exceptional early-stage startups that the ecosystem and large corporations have access to. And I can say this with confidence, because I believe YC will build “I've seen it happen when I was in the industry,” Aboyezi said, referring to the experience of watching his friend and Beeper and Peeble founder Eric Migikowski participate in the early days of the accelerator. did. “I saw [YC] Build, grow, and become what you are today. And we thought to ourselves that it is possible to realize it here. ”
Although there are some corporate VC firms with ties to French telecom companies, such as Orange Ventures, local companies have yet to embrace the venture asset class comprehensively.
Accelerate Africa's goal is to develop partnerships between portfolio companies and local banks, telecommunications companies and others through direct equity investments as well as mentorship, resources and services. Its goal is to generate $1 million in revenue for its portfolio companies.
“We work closely with these companies to create exit paths and help our companies solve problems specific to their markets, rather than copying Silicon Valley funding models. “We are working hard,” Aboyeji said.
There are large funds focused on Africa such as Partech Africa, Norsken22, Algebra Ventures and Al Mada. Together, they have raised nearly $1 billion in investment on the continent, but have yet to be widely deployed. Building stronger companies in the early stages will bring more companies to the table with these large investors.
The issue of exit still remains. Technology listings remain rare in Africa's local markets, with only two startups currently floating the idea of an IPO: Flutterwave and Interswitch.
AI exists in Africa too.
Along with investor appetite, African startups face another problem: being outdated.
Generative AI is currently the hottest trend in technology, but Africa and other emerging markets have traditionally lagged behind Western countries in North America and Europe when it comes to building AI startups. Apparently, more than half of the 92 African companies that passed through YC were focused on fintech, which was YC's top sector before the AI boom.
CDIAL.AI, one of Accelerate Africa's portfolio companies, builds conversational AI that fluently understands and speaks African languages. The startup represents one of the few efforts from the continent and an underrepresented community to join the global generative AI conversation.
Nigeria now has an accelerator that aims to reverse that trend.
GoTime AI, based in Lagos, targets founders developing AI products in Africa. Using Nigeria as a launching pad, the group includes five startups.
GoTime AI is the brainchild of Flutterwave's other co-founder and CEO, Olugbenga Agboola, through his early-stage venture capital firm and studio Resilience17 (R17).
“AI is the most influential global megatrend to emerge in the last 20 years since mobile,” Hassan Luongo, general partner at R17, told TechCrunch in an interview. “It’s still early days, so we want to move this engine forward. This isn’t a copy-paste from YC, but it’s simply a recognition that it’s not just Silicon Valley that is excited about AI. ”
This represents an interesting change. Until now, leading startups in emerging markets have found success by replicating and adapting the Silicon Valley model to suit local needs in areas such as fintech, logistics and healthtech. On the other hand, AI, like SaaS, is undoubtedly playing a global role, presenting challenges but also opportunities.
Luongo, who leads the GoTime AI effort, said Africa has the opportunity to build AI products at a lower cost than in Western markets, especially at lower valuations, making African AI startups more attractive to acquirers. I think it has the potential to become
“That's our bet – they'll meet it. We're betting that the talent here will be as good or better than in other countries, while benefiting from lower operating costs. ” Luongo argued. “Also, companies here are likely not to have high valuations, so global companies could probably acquire these companies at a lower price, but still have access to great talent and their products.” can.”
Pipeline modification: To check or not to check?
Unlike Accelerate Africa, GoTime AI is not aiming to become the next YC on the African continent. Instead, the accelerator is positioning itself as a stepping stone for AI startups to strengthen their foothold in accessing opportunities from early-stage investors.
Depending on the success of the first cohort in Nigeria, the accelerator plans to expand the program across Africa and scale to accept 15-20 startups per cohort.
AI applications for legal, compliance, and sales/customer relationship management (a trend also seen in YC's recent batch) are part of GoTime AI and Accelerate Africa's portfolios. Both accelerators start with two cohorts per year, but the contract structures are very different.
GoTime AI will invest up to $200,000 in exchange for 8% equity. It consists of $25,000 upfront, $75,000 for demo day, and $100,000 for the startup's initial funding. The accelerator also provides startups with mentorship, workspace, and access to APIs and cloud computing credits to train AI models and test products.
Accelerate Africa currently operates with less than $1 million in grants, but does not offer up-front funding or membership contributions.
“The utility of these first two cohorts is not the money, but the storytelling, the halo effect, the community. Once the funding comes in, we will probably change the model,” said Oji Udezue, venture partner at Accelerate Africa. told TechCrunch about the accelerator's decision not to fund startups. Instead, its sister fund, Future Africa, may co-invest between $250,000 and $500,000 through a standard investment process after the program ends.
Accelerate Africa boasts an acceptance rate of 1.4% and claims to have helped its first group of startups raise more than $5 million, despite not providing up-front funding. “We have a quality bar, and we don’t want to build an accelerator in Africa that isn’t better than YC,” Udezue said.