The MasterCard Foundation has stepped out of its commitment to invest $100 million in a major African venture capital firm while tech startups on the continent struggle with Western funders.
In 2024, 54 Collective, Africa's most active investors, and the MasterCard Foundation, an international non-governmental organization, “pursuing a variety of strategies to advance, the partnership will end on April 30, 2025,” the VC company told Lest of World in an email.
There is a little vacuum left.
At an internal meeting on February 20th, the leadership team at 54 Collective (formerly founder Factory Africa) tells staff that the company will lead to layoffs as the company will disband the entire venture studio team.
Daniel Hailu, executive director of the MasterCard Foundation's Pan-African program, told the Lest of World in a statement, “Startups currently participating in the program will continue to receive technical support from 54 Collective Venture Studio until April 30, 2025.” “The MasterCard Foundation continues to be committed to Young African work strategies to access dignified and fulfilling work by 2030 for 30 million young people, especially young women.”
Funding for African startups has been declining since 2022, and entrepreneurs and investors are worried that the development could further undermine the overall investment sentiment.
In addition to the immediate impact on the 54 Collective team, such developments leave a significant vacuum in the ecosystem, Alim Ladha, founder and CEO of Edtech Company Instill Education in South Africa, told Lest of World.
“I think the short-term effect of such developments is that there is clearly a valuable destruction,” Radha said. “Most ventures (built or supported by this fund) may not be at the stage where they are independent. From an ecosystem perspective, we leave a little vacuum and who plays the role of getting in and stimulating when there is no such deal?”
Iyinoluwa Aboyeji, managing partner of Startup Accelerator, accelerates Africa and co-founder of Fintech Unicorn Flutterwave, told Rest of World that it was time for African founders to stop building the globalist system and the foundation's broken promises and orders.
Several international investors withdraw from Africa during the 2022 fundraising crunch and have not returned to the continent since. For example, 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 to $2.2 billion from the previous year.
Founded in 2018, 54 Collective is headquartered in South Africa and invests in over 70 startups.
The company combines venture studios and venture capital models by providing investment and mentoring to early-stage founders in Africa. IT partners with large corporate organizations and impact investment companies to provide services. The company's partners include Standard Bank of South Africa, South African healthcare company Netcare, and a small foundation headquartered in Dublin.
In August 2023, 54 Collective secured its biggest funding when MasterCard Foundation and Johnson & Johnson Impact Ventures invested in VC companies to expand their “unconventional VC model” and committed to better serve founders across Africa. Under the agreement, 54 Collective will receive $20 million a year from the MasterCard Foundation over five years.
In an email to the rest of the world, 54 Collective said that MasterCard Foundation funding is crucial to its business. Senior executives said it is likely to cut core investment teams across offices in Kenya, Nigeria and South Africa, but the company said it will continue to invest as usual.
MasterCard and MasterCard Foundation have invested extensively in African technology ventures in recent years. Last year, the rest of the world reported how MasterCard invested in at least three African companies, including Jumia, Airtel Africa and MTN Mobile Money.
Victor Asemota, a partner at VC Firm and Ventures, said last year that Mastercard and its rival Visa opened Africa worldwide and improved business marching on the continent. “There was a lot of confusion before them,” Acemota said. “I remember when Interswitch launched a Magstripe card that failed without the EMV (Europay, MasterCard, and Visa) standards. It was a mess. Visa and MasterCard brought sanity.”
The MasterCard Foundation operates the Africa Growth Fund. This is a funding fund that supports small and medium-sized businesses in the continent “with the aim of enabling dignified and fulfilling work for young people, especially young women,” according to the website. In addition to the 54 Collective, the MasterCard Foundation is investing in at least five other investment vehicles in Africa, including Nigeria's Vested World and Aruwa Capital Management, and Kenya's Chui Ventures.
Radha said the development should remind Africans that “stop building businesses that rely on the whims of charities around the continent.”
“The most important thing that all of these philanthropists spoke about a few years ago, perhaps before Covid (-19), was education and youth employment. And it was food security driven by the food crisis during Covid (-19). Then it was Agritech, and it was climate technology,” he said. “And I think the reality of that is that because it's the reason we rely on philanthropy and we maintain, I think we just realized that building a business is not a sustainable model for our continent.”
