After four years of accelerating startups, Founders Factory Africa is rebranding as 54 Collective, a VC firm with a $40 million fund to invest in early-stage African ventures across various sectors.
“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,” Bongani Sithole, CEO of 54 Collective, told TechCabal.
Venture Capital inflows to African startups declined 31% in 2023 to $4.5 billion as foreign investors raced to the exits after the end of the zero-interest rate period. The number of deals through equity or debt decreased to 545 from a record 781 in 2022, according to a report by the London-based African Private Capital Association. Many investors have argued that local VCs with deep knowledge of the continent need to step up and fill the gap.
54 Collective joins a growing list of local investors like Partech that are stepping in to keep capital flowing to startups in Africa.
While building Founders Factory Africa, Sithole realised why many tech companies fail after raising money from investors. They often take too long to set up a board; when some do, they see the board as a reporting structure rather than tapping into the advisory capabilities of the members.
“We have seen too many examples that we are not going to mention. It has always been the case that they hire and spend so much money too quickly, and the obsession about products and customers takes a back seat,” Sithole said.
54 Collective takes a board seat in the early-stage companies that it invests in to help mitigate business risks and allow startups to focus on what matters. It believes startups should be “obsessed” with building the product and growing the customer base; 54 Collective also helps its portfolio companies hire talents.
Founded by Roo Rogers, Sam Sturm and Alina Truhina, 54 Collective’s path to becoming a venture capital firm was defined by a mammoth $114 million capital raised from Mastercard Foundation and Johnson & Johnson Impact Ventures in 2023.
Although the company had said it would use the funding to expand its model to serve founders across the African tech ecosystem, becoming a full-fledged venture capital gives it more room to expand its scope and attract more investors. As an accelerator, its revenue model was limited.
Becoming a venture capital firm allows the company to expand its revenue model. 54 Collective invests up to $250,000, depending on the business’s stage. It also provides non-dilutive capital of up to $150,000. Non-dilutive capital allows startups to retain full ownership of their company. In the case of 54 Collective, it is a loan charged at 5%.
“In the next five years starting from last year, we want to invest in 105 venture-bankable startups. Per year, we are doing 21 businesses. By the end of this year, we will be at 42 startups. We are currently at 29 startups,” Sithole said.
Editor’s note: This article has been updated to include the third co-founder of 54 Collective.
