Founders Factory Africa rebrands as 54 Collective vc firm

• Published On: 07 August 2024 at 18:42

After four years of propelling businesses across the continent, Founders Factory Africa has rebranded as 54 Collective, a sector-agnostic venture capital firm with a $40 million fund focused on early-stage African ventures.

"Today, we are a venture capital firm with a $40 million fund." In addition, we have $107 million to support our venture success platform. Bongani Sithole, CEO of 54 Collective, told TechCabal that they manage approximately $150 million to support companies and make investments.

This transition comes at a critical time for African companies, which saw venture capital inflows fall by 31% to $4.5 billion in 2023 as foreign investors pushed back following the end of the zero-interest rate period. According to a research from the London-based African Private Capital Association, the number of equity or debt agreements fell to 545 from a record 781 in 2022. Many industry experts have urged local venture capitalists with extensive understanding of the continent to fill the void left by departing international investors.

54 Collective has now joined the ranks of local investors such as Partech, who are moving up to ensure that cash flows to African entrepreneurs.

While developing Founders Factory Africa, Sithole discovered a common reason why many digital companies fail after raising capital: they frequently postpone forming a board, or when they do, they perceive it solely as a reporting structure rather than a source of strategic guidance.

"We've seen too many examples where startups hire and spend money too quickly, with the focus on products and customers taking a back seat," Sithole told me.

To solve these difficulties, 54 Collective joins the boards of the early-stage firms in which it invests, reducing business risks and allowing startups to focus on product development and customer growth. In addition, 54 Collective helps its portfolio companies hire people.

54 Collective, founded by Roo Rogers and Alina Truhina, has evolved into a venture capital firm thanks to a significant $114 million funding round from the Mastercard Foundation and Johnson & Johnson Impact Ventures in 2023.

Initially, the company intended to use this investment to expand its concept and support founders throughout the African digital sector. However, being a full-fledged venture capital firm has enabled 54 Collective to expand its reach and attract new investors. Previously, as an accelerator, 54 Collective's income model was constrained, but as a venture capital firm, it has greater flexibility.

The firm invests up to $250,000 in entrepreneurs, depending on their stage, and provides non-dilutive funding of up to $150,000. This non-dilutive funding, granted as a loan with a 5% interest rate, enables companies to keep full ownership of their business.

"Over the next five years, beginning last year, we intend to invest in 105 venture-bankable firms. Each year, we intend to support 21 firms. By the end of the year, we will have 42 startups. "We're currently at 29," Sithole remarked.