Mastercard Foundation has pulled out of a commitment to invest $100 million in a leading African venture capital firm at a time when tech startups on the continent are struggling to woo Western funders.
54 Collective, the most active investor in Africa in 2024, and Mastercard Foundation, an international nongovernmental organization, “will be pursuing different strategies shifting forward, and the partnership will finish on 30 April 2025,” the VC firm informed Rest of World in an email.
We are left with a bit of a vacuum.
During an internal meeting on February 20, the leadership team of 54 Collective (formerly Founders Factory Africa) informed staff this would result in layoffs as the firm will disband its entire venture studio team, which includes staff that supports its portfolio companies on product, technology, marketing and growth, human resources, and business development, three senior company officials who attfinished the meeting informed Rest of World, seeking anonymity as they were not authorized to talk to the media.
“Startups currently in the program will continue receiving technical support from the 54 Collective Venture Studio until April 30, 2025,” Daniel Hailu, executive director of pan-African programs at the Mastercard Foundation, informed Rest of World in a statement. “The Mastercard Foundation remains committed to its Young Africa Works strategy to see 30 million young people, especially young women, access dignified and fulfilling work by 2030.”
Startup funding in Africa has been declining since 2022, and entrepreneurs and investors worry this development could further hurt the overall investment sentiment.
Besides its immediate impact on the team at 54 Collective, a development like this leaves a large vacuum in the ecosystem, Alim Ladha, founder and CEO of South African edtech company Instill Education, informed Rest of World.
“I believe the short-term effect of a development like this is obviously that there will be value destructions,” Ladha stated. “Most of the ventures [built or supported by this fund] may not be at a stage where they’re self-sustaining. From an ecosystem perspective, we are left with a bit of a vacuum and who plays that role of coming in and stimulating in the absence of such a deal?”
Iyinoluwa Aboyeji, managing partner at startup accelerator Accelerate Africa and co-founder of fintech unicorn Flutterwave, informed Rest of World it was “time for our ecosystem to stop building on the broken promises and broken mandates of globalist institutions and foundations who would rather keep African founders broke and broken.”
Several international investors pulled out of Africa during the 2022 funding crunch and have since never returned to the continent. For instance, Tiger Global invested in five African startups in 2022 but has not announced any further bets on the continent.
In 2024, investment in African startups fell 25% year on year to $2.2 billion.
Founded in 2018, 54 Collective is headquartered in South Africa and has invested in over 70 startups.
The firm combines venture studio and venture capital models by providing investment as well as mentorship to early-stage founders in Africa. It partners with large corporate organizations and impact investment firms to deliver its services. The company’s partners include South Africa’s Standard Bank, South African health-care company Netcare, and the Dublin-headquartered Small Foundation, among others.
In August 2023, 54 Collective secured its largest funding when Mastercard Foundation and Johnson & Johnson Impact Ventures committed to investing $114 million into the VC firm to scale its “unconventional VC model” and better serve founders across Africa. Under the agreement, 54 Collective would receive $20 million per year from the Mastercard Foundation over five years.
In its email to Rest of World, 54 Collective stated the Mastercard Foundation funding was pivotal to its business. While senior executives stated the company is likely to reduce its core investment team across its offices in Kenya, Nigeria, and South Africa, the firm stated it will continue to invest as usual.
Mastercard and Mastercard Foundation have extensively invested in tech ventures in Africa in recent years. Last year, Rest of World reported how Mastercard invested in at least three large African companies including Jumia, Airtel Africa, and MTN Mobile Money.
Victor Asemota, partner at VC firm AnD Ventures, informed Rest of World last year that Mastercard and its rival Visa opened Africa to the world and improved how business is done on the continent. “Before them, there was a lot of chaos,” Asemota stated. “I remember when Interswitch launched their failed magstripe cards without EMV [Europay, Mastercard, and Visa] standards. It was chaotic. Visa and Mastercard brought sanity.”
Mastercard Foundation runs Africa Growth Fund — a fund of funds through which it supports tiny and medium enterprises on the continent “with the goal of enabling dignified and fulfilling work for young people, particularly young women,” according to its website. Besides 54 Collective, Mastercard Foundation has invested in at least five other investment vehicles in Africa, including Nigeria’s VestedWorld and Aruwa Capital Management, and Kenya’s Chui Ventures.
Ladha stated this development should remind Africans to “stop building businesses that are depfinishent on the whims of philanthropies around the continent.”
“A few years ago, maybe before Covid[-19], the most important thing that all these philanthropist funders talked about was education and youth employment. And then it was food security driven by the food crises during Covid[-19]. Then it was agritech, then it was climate tech,” he stated. “And I believe the reality of it is all of us have just realized that building a business, relying on philanthropy to be the reason we sustain is not a sustainable model for our continent.”
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