Founders Factory Africa, a renowned startup accelerator, is rebranding to 54 Collective. This strategic move marks a significant shift in the company’s approach to supporting innovators across the African continent.
From Accelerator to Venture Capital: 54 Collective’s Evolution
The transformation of Founders Factory Africa into 54 Collective represents more than just a name change. It signals the organization’s evolution from a startup accelerator to a full-fledged Venture Capital (VC) firm.
This transition brings with it a team of 70 specialists dedicated to collaborating with startup founders to overcome the unique challenges faced in the African ecosystem, such as currency devaluation and unfavorable regulations.
Bongani Sithole, CEO of Founders Factory Africa, explains the shift in focus: “We have learnt that capital that is dilutive alone isn’t enough for early-stage startups. At that stage, you’re still learning and losing a lot of ownership through equity, which is not good for the market or the founder.”
Increased Capital Allocation and Support for Early-Stage Startups
As 54 Collective, the firm plans to significantly increase its capital allocation to African startups. Investments will range from $200,000 to $500,000, with a specific focus on early-stage startups before they reach Series A funding. This strategy aims to provide crucial support during the most vulnerable stages of a startup’s growth.
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To address the unique needs of early-stage companies, 54 Collective has introduced innovative financing options. “We introduced non-dilutive loans less than 5% to allow entrepreneurs to have more capital to build businesses at low-interest rates,” Sithole revealed. This approach allows founders to retain more ownership while accessing the capital they need to grow.
Empowering Women Entrepreneurs in Africa
Recognizing the global disparity in funding for women-led startups, 54 Collective is taking proactive steps to drive change. Sithole announced, “We are intentionally driving women participation in this investment because globally less than 10% of women are getting funding. So, we provide an additional $150,000 to women-led founders.” This initiative aims to level the playing field and foster greater diversity in the African startup ecosystem.
While VC funding for African startups has seen significant growth since 2013, recent years have witnessed a slowdown. Sithole attributes this partly to an overreliance on foreign VCs and accelerators, who often prefer investing in less risky late-stage startups. This trend has left many promising early-stage startups struggling to secure funding.
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To address this issue, Sithole advocates for building up local investment through engagement with corporates and high net-worth individuals. He also emphasizes the importance of supporting older startups to achieve successful exits, which can then fuel reinvestment in new ventures, creating a virtuous cycle of growth and support within the ecosystem.
Learning from Traditional MSMEs
Sithole believes that there’s much to be learned from traditional Micro, Small, and Medium Enterprises (MSMEs) that contribute significantly to African economies.
Their resilience and determination in overcoming challenges like capital shortfalls and tough competition offer valuable lessons for the startup ecosystem, especially during funding droughts.
“The cycle between 2020 and 2023 has been difficult for Africa but if you compare that to China and India, you’ll realize that impact happened more in other continents than in Africa. That tells us that even with these challenges, the global market is bullish on the African frontier,” Sithole observed.
The Future of African Entrepreneurship
As Founders Factory Africa transitions into 54 Collective, the firm is poised to play a pivotal role in shaping the future of African entrepreneurship. By combining the innovative potential of tech startups with the proven resilience of traditional businesses, 54 Collective aims to build a stronger, more diverse ecosystem.
Sithole concludes with a powerful vision: “Entrepreneurship is a pathway to building economies but we need to look at technology as a means to an end and not as an end in itself.” This philosophy underscores 54 Collective’s commitment to fostering sustainable growth and innovation across the African continent.
As Founders Factory Africa embarks on this new chapter as 54 Collective, the African startup ecosystem stands to benefit from increased support, innovative funding models, and a renewed focus on early-stage companies. This transformation promises to usher in a new era of growth and opportunity for entrepreneurs across the continent.
