As YC withdraws from Africa, graduates are launching accelerators to fill the gap

Influential accelerator Y Combinator made waves in Africa in 2020 when it make clear the market and started welcoming startups from the region into its cohorts. The move was huge: on this nascent market, startups especially depend on such programs to find their feet and connect with investors, and YC is the platinum standard on this process.

Fast forward to today, nevertheless, and that spotlight has began to look a bit fickle. Currently, YC is following suit big problems in areas reminiscent of manufacturing, defense and climate, and has quietly reduced its concentrate on developing markets. However, in Africa, some people use it as a possibility. To fill this gap, local accelerators are emerging – powered by none apart from African YC graduates.

The latest wave of accelerators is coming at the same time that the model favored by older local startup accelerators is changing. The co-creation of HUB (CcHub), Flat6Labs, Baobab Network and MEST Africa has seeded corporations with global accelerators for years, providing a startup pipeline for larger investors, including foreign ones, during the enterprise boom. Now, as foreign investors withdraw, local players are being forced to rethink how to acquire and develop startups on the continent.

“In my opinion, instead of attacking US companies (who don’t care about Africa anyway and are just being opportunistic), the community needs to come together to programmatically fund the sub-$1 million pipeline, much like Techstars, YC and 500 Startups have done over the years all the years,” wrote Iyinoluwa Aboyeji, co-founder of YC-backed Flutterwave, in Recently on LinkedIn.

Speed ​​up Africalaunched by Aboyeji, is one such initiative. Already having 20 startups in its portfolio, the year-old accelerator spun off from enterprise capital firm Aboyeji’s internal Future Africa program (where fellow Accelerate Africa co-founder, Mia von Koschitzky-Kimanican be a partner).

Aboyeji’s ambition is to turn into the “YC of Africa” ​​- simply described, if not simply executed.

Indeed, African start-ups are currently at a crossroads. Successful African founders who’ve passed through the YC process have little question about the value of being chosen for programs with a global focus.

“Anyone who knows me has heard me say, ‘Africa’s YC is YC,’” Aboyeji, who can be the founding father of SoftBank-backed Andela, told TechCrunch in a recent interview with TechCrunch. “This is my most typical response when someone mentions joining an accelerator. I all the time tell them: “YC is standard and let me help you prepare an offer so you can apply there.”

However, the truth is that no African startup made it to the latest summer edition of Y Combinator; and in the three previous batches, there have been only three start-ups from the continent. Let’s compare this with previous years, when the Summer 2021 group included 10 African startups, Winter 2022 – 23, and Summer 2022 – 8 (and in completely distant years related to Covid-19 there have been much more).

YC’s change in attitude just isn’t simply because what it’s searching for has modified: since 2022, it has also reduced the size of its post-pandemic cohorts (when at its peak the variety of startups was 400 in a single batch) and returned to -person, with international founders, in turn, are more susceptible to stricter U.S. visa policies. Startups in Latin America and India also saw large declines in adoption.

“YC has and will continue to fund startups and founders from all over the world, including Africa. During COVID parties, we funded global companies via Zoom,” a YC spokesperson told TechCrunch. “Today we are requiring all YC startups to move to San Francisco, which has naturally changed the mix of startups applying to YC. We are still interested in talking to and accepting applications from the best startups from around the world.”

Prioritizing local capital, partners and public markets

According to the study, foreign financing, which incorporates enterprise capital funds and development finance institutions, has typically accounted for about 77% of all enterprise capital financing in Africa over the past decade. African Private Capital Associationdue to this fact, the decline in interest abroad had a direct impact on the amounts invested in Africa. It found that in the first half of 2024, the overall value of investment in startups dropped by a surprising 65% compared to the previous 12 months.

“It starts with a pipeline of exceptional early-stage startups that the ecosystem and larger companies have access to, and then scales it up. I can say this with certainty because I saw it happen when YC was built,” Aboyeji said, referring to his experience watching Erik Migicovsky, friend and founding father of Beeper and Peeble, take part in the accelerator’s early days. “I watched (YC) build, grow and become what it is today. And I think we can do it here.”

Some corporate VC firms reminiscent of Orange Ventures – affiliated with the French telecommunications company – exist, but local corporations haven’t yet collectively embraced this enterprise asset class.

Accelerate Africa goals to create partnerships between portfolio corporations and native banks, telecommunications corporations and others, not only through direct capital investments, but in addition through mentoring, resources and services. The company’s goal is to achieve revenues of USD 1 million for its portfolio corporations.

“We work closely with these corporations to create exit paths and help our companies solve problems specific to their markets, rather than copying Silicon Valley’s financing model,” Aboyeji said.

There are large Africa-focused funds reminiscent of Partech Africa, Norrsken22, Algebra Ventures and Al Mada. Collectively, they’ve raised almost $1 billion in investment on the continent, but haven’t yet been widely implemented. Building stronger early-stage corporations will put more of them at the table with greater investors.

There continues to be the matter of exits. Listings of technology corporations in local African markets remain rare, with only two startups – Flutterwave and Interswitch – currently choosing an IPO.

There can be artificial intelligence in Africa.

Apart from investor appetite, startups in Africa face one other problem: they are out of fashion.

Generative AI is the hottest trend in technology today, but Africa and other emerging markets have to this point lagged behind their Western counterparts in North America and Europe when it comes to creating AI-based startups. Significantly, greater than half of the 92 African corporations that passed through YC focused on fintech – YC’s most vital sector before the AI ​​boom.

Only one in all Accelerate Africa’s portfolio corporations, CDIAL.AI, creates conversational AI that fluently understands and speaks African languages. Startup represents one in all the few ventures from the continent and underrepresented communities to join the global discourse around generative AI.

There is now an accelerator in Nigeria that goals to reverse this trend.

GoTime AIbased in Lagos, is aimed toward founders developing AI products in Africa. Using Nigeria as a place to begin, it has five startups in its cohort.

GoTime AI is an idea Agbol’s defenderfellow co-founder and CEO of Flutterwave, through his enterprise capital firm and early-stage studio Resilience17 (R17).

“Artificial intelligence is the most influential global megatrend to emerge in the last 20 years since mobile devices.” Hasan’s voicegeneral partner at R17, he told TechCrunch in an interview. “It’s still early, so we want to speed up work on this engine. This is not a copy-paste from YC, but it is simply an acknowledgment that it is not only Silicon Valley that is excited about artificial intelligence.”

This highlights an interesting change. In the past, leading startups in emerging markets have managed to clone and adapt Silicon Valley models to regional needs in sectors reminiscent of fintech, logistics and health technology. On the other hand, artificial intelligence is undeniably a world game, similar to SaaS – a challenge, but in addition a possibility.

Luongo, who leads GoTime AI’s operations, believes Africa has a possibility to construct AI products at lower costs than in Western markets, which could make AI startups here more attractive to buyers, especially as they command lower valuations.

“We assume they will work. We are betting that the talent level here will be comparable to or even better than talent in other countries, while at the same time we will benefit from lower operating costs,” Luongo argued. “Also, companies here probably won’t have high valuations, so global companies could probably buy them at a lower price but still get great talent and their products.”

Pipeline repair: inspection or no inspection?

Unlike Accelerate Africa, GoTime AI doesn’t aim to be the next YC on the continent. Instead, the accelerator becomes a springboard for AI startups to empower them to access opportunities offered by early-stage investors.

The accelerator plans to expand its program across Africa and accept 15 to 20 startups per cohort, depending on the success of its inaugural cohort in Nigeria.

AI applications for legal, compliance and sales/customer relationship management – ​​trends also seen in recent batches of YC – are present in the GoTime AI and Accelerate Africa portfolios. Both accelerators start with two cohorts per 12 months, although their deal structures differ significantly.

GoTime AI invests up to $200,000 in exchange for 8% equity, which is structured at $25,000 upfront, $75,000 at the demo day and $100,000 during the startup’s first fundraising. The accelerator also offers its startups mentorship, workspaces, and access to APIs and cloud credits to train AI models and test products.

Accelerate Africa, which currently operates on a grant of lower than $1 million, doesn’t provide upfront funding or take capital upon adoption.

“The usefulness of these first two cohorts is storytelling, halo effect, community, not money. As soon as we get the money, we will probably change the model,” he said Black Eraserenterprise partner at Accelerate Africa, to TechCrunch regarding the accelerator’s decision not to provide funding to its startups. Instead, its sister fund Future Africa can co-invest between $250,000 and $500,000 after the program ends as a part of the standard investment process.

Although Accelerate Africa doesn’t offer upfront funding, it has an acceptance rate of 1.4% and claims to have helped first cohort startups raise over $5 million. “We have a quality bar; we don’t want to build an accelerator that is no better than YC in Africa,” Udezue noted.