After a successful four-year stint in accelerating startups, Founders Factory Africa has undergone a strategic transformation and is now known as 54 Collective. The rebranded entity steps into the venture capital arena with a robust $40 million fund, dedicated to investing in early-stage ventures across a multitude of sectors in Africa.
Bongani Sithole, CEO of 54 Collective, shared insights: “We’ve evolved into a venture capital firm, armed with a $40 million fund. This is complemented by an additional $107 million that supports our venture success platform. Collectively, we’re managing upwards of $150 million, a pool of capital that’s geared towards nurturing startups and facilitating strategic investments.”
The landscape of venture capital inflows to African startups saw a 31% dip in 2023, with investments totaling $4.5 billion as foreign investors retreated post the zero-interest rate era. The deal count also saw a decline, dropping to 545 from the previous year’s record of 781, as per the African Private Equity and Venture Capital Association’s report. This scenario has sparked a dialogue about the crucial role local VCs, with their intrinsic understanding of the continent, can play in bridging the investment gap.
54 Collective is joining the ranks of local investment entities like Partech, stepping up to ensure a steady flow of capital to African startups.
During his tenure with Founders Factory Africa, Sithole gained insights into the pitfalls tech companies face post-funding. A common issue he observed was the delay in establishing a board or underutilizing its advisory potential, often leading to misdirected focus and premature scaling.
54 Collective is proactive in taking a board seat in the startups it invests in, aiming to steer them clear of common business hazards and keeping their focus sharp on product development and customer growth. The firm also extends its expertise in talent acquisition to its portfolio companies.
The transition to a venture capital firm was propelled by a significant capital injection of $114 million in 2023 from the Mastercard Foundation and Johnson & Johnson Impact Ventures. This move not only broadens 54 Collective’s operational scope but also enhances its appeal to a wider investor base. As an accelerator, its revenue generation avenues were limited, but the VC model opens up new financial horizons.
54 Collective’s investment strategy includes providing up to $250,000 in capital, tailored to the developmental stage of the business, alongside non-dilutive funding options of up to $150,000. This non-dilutive capital, structured as a loan at a 5% rate, allows startups to maintain full ownership.
Sithole outlines ambitious goals for the firm: “Starting from last year, our five-year vision is to back 105 venture-bankable startups, averaging 21 businesses annually. By the end of this year, we aim to have supported 42 startups, and we’re currently at 29.”
54 Collective’s rebranding and strategic shift mark a significant milestone in its journey to become a cornerstone in the African startup ecosystem, providing both capital and strategic guidance to the next generation of innovative businesses.
