After four years of accelerating startups, Founders Factory Africa (FFA) has rebranded as 54 Collective, a venture capital firm with a $40 million fund aimed at investing in early-stage African ventures across various sectors. The rebranding marks a significant shift in the organization’s approach to supporting African startups.
Financial Backing and Investment Strategy
Bongani Sithole, CEO of 54 Collective, highlighted the firm’s strong financial backing, stating: “Today, we are a VC firm with a $40m fund. Alongside that, we have $107 million that is backing our venture success platform. In total, if you add the $107 million and the $40 million fund, we are almost on the north of $150 million that we are managing in supporting startups and also making investments”.
Context and Industry Trends
The rebranding comes amid a challenging period for venture capital inflows to African startups, which saw a 31% decline in 2023, dropping to $4.5 billion. The number of deals also decreased to 545 from 781 in 2022. This downturn is attributed to foreign investors pulling back following the end of the zero-interest rate period. Local VCs with deep knowledge of the African market are seen as crucial in filling this investment gap.
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Unique Approach and Philosophy
54 Collective differentiates itself by taking board seats in the early-stage companies it invests in. This strategy aims to mitigate business risks and ensure startups focus on building products and growing their customer bases. Sithole emphasized the importance of startups being “obsessed” with their products and customers, a focus often lost when companies scale too quickly without adequate governance structures.
Founding and Evolution
Founded by Roo Rogers and Alina Truhina, 54 Collective’s transition to a VC firm was bolstered by a significant capital raise of $114 million from the Mastercard Foundation and Johnson & Johnson Impact Ventures in 2023. This funding was initially intended to expand their model across the African tech ecosystem but has now facilitated their evolution into a full-fledged venture capital firm. This change allows 54 Collective to expand its revenue model and scope of operations.
Investment Focus
54 Collective invests up to $250,000 in early-stage startups, depending on the business’s stage. It also offers non-dilutive capital of up to $150,000, which is provided as a loan with a 5% interest rate, allowing startups to retain full ownership. The firm aims to invest in 105 venture-bankable startups over five years, with a target of supporting 21 businesses per year.
Impact and Future Plans
54 Collective’s rebranding and expanded investment strategy are set to provide significant support to African startups, fostering innovation and growth in the continent’s tech ecosystem. By maintaining a hands-on approach and securing substantial financial backing, 54 Collective is well-positioned to drive sustainable development and success for African ventures.