Finance

In 2020, Y Combinator (YC), one of the world’s most influential startup accelerators, turned its attention to Africa, sparking excitement across the continent’s nascent tech ecosystem. For startups in the region, programs like YC serve as critical springboards, connecting them with global investors and mentorship at a stage when resources are scarce. With YC often considered the gold standard, its focus on African startups symbolized a moment of validation for the region. A Shifting Focus at YC Fast forward to the present, YC’s attention to Africa appears to have waned. The accelerator has pivoted toward addressing global challenges in sectors such as manufacturing, defense, and climate, while quietly reducing its emphasis on emerging markets. African representation in recent YC cohorts has dwindled; none of the startups in the most recent batch hailed from Africa, and only three were included in each of the three prior batches. By contrast, the Summer 2021 batch featured 10 African startups, and Winter 2022 had 23. The shift reflects broader changes within YC itself. Since 2022, YC has reduced cohort sizes from their pandemic-era peak of 400 startups per batch and reinstated in-person participation. This has introduced barriers for international founders, particularly those navigating restrictive U.S. visa policies. Similar declines in representation have been noted in regions like Latin America and India. Despite this, YC insists it remains committed to global entrepreneurship. A spokesperson noted, “YC has and will continue to fund startups and founders from around the world, including Africa.” However, the logistical and strategic shifts suggest that Africa’s reliance on YC as a developmental engine may no longer be as feasible as it once was. Filling the Gap: Local Accelerators Step Up The reduction of YC’s presence in Africa has created opportunities for local players to step in. A new wave of accelerators—often spearheaded by African alumni of YC—has emerged, aiming to fill the void and redefine the startup ecosystem. One such effort is Accelerate Africa, launched by Iyinoluwa Aboyeji, co-founder of Flutterwave and Andela. Born out of Future Africa, Aboyeji’s venture capital firm, Accelerate Africa has already supported 20 startups. With an ambitious goal of becoming “The YC of Africa,” the program is positioning itself as a key player in developing the continent’s early-stage pipeline. Unlike YC, Accelerate Africa doesn’t provide initial funding or take equity upon admission. Instead, it focuses on mentorship, partnerships, and post-program investments through its sister fund, Future Africa. “Instead of shadowboxing U.S. firms who were merely opportunistic, the community must come together to fund startups under $1 million in a structured way, just like Techstars, YC, and 500 Startups did in their early days,” Aboyeji wrote on LinkedIn. Accelerate Africa is working to forge connections between its startups and local corporations, aiming to help companies achieve $1 million in revenue through resources, mentorship, and market-specific problem-solving. Evolving Accelerator Models Established accelerators like Co-creation Hub (CcHub), Flat6Labs, Baobab Network, and MEST Africa have historically operated alongside global players, supporting startups during the venture capital boom. But with foreign investors pulling back and overall funding for African startups dropping 65% in the first half of 2024 compared to the previous year, these local programs have been forced to rethink their strategies. One key shift involves moving away from Silicon Valley’s traditional equity-based funding model to focus on long-term partnerships with local banks, telcos, and corporations. The goal is to create pathways for growth and exit strategies tailored to Africa’s unique business landscape, rather than mirroring Silicon Valley’s approach. The Rise of AI Accelerators in Africa Another emerging trend is the focus on artificial intelligence (AI). While fintech has dominated Africa’s tech scene—over half of the 92 African startups admitted to YC were in fintech—the global AI boom has inspired a new crop of startups to enter the field. GoTime AI, based in Lagos, is one such accelerator targeting AI-focused founders. Founded by Olugbenga Agboola, co-founder and CEO of Flutterwave, through his early-stage VC firm Resilience17, GoTime AI has five startups in its inaugural cohort. The accelerator aims to position Africa as a competitive player in AI, offering startups mentorship, workspaces, and access to cloud computing credits. “AI is the most impactful global trend since mobile, and it’s still early,” said Hasan Luongo, general partner at Resilience17. “Africa has an opportunity to build AI products at lower costs, making startups here more attractive to acquirers.” Challenges and Opportunities Despite the enthusiasm, challenges remain. Africa’s startups have historically relied on foreign funding, which has accounted for 77% of venture capital on the continent over the last decade. As international interest declines, there is a pressing need to build a local capital base. Aboyeji sees this as an opportunity for Africa to take control of its own narrative. “It starts with a pipeline of exceptional early-stage startups and grows from there,” Aboyeji said. “I watched YC build from scratch, and I believe we can do the same here.” While efforts like Accelerate Africa and GoTime AI are promising, questions about exits and scaling remain. Tech IPOs are rare in African markets, with only Flutterwave and Interswitch seriously considering public offerings. However, by fostering a robust ecosystem of early-stage startups and aligning with local corporate interests, these accelerators are laying the groundwork for a more sustainable and independent African tech sector. A Future Beyond YC The departure of global accelerators like YC from Africa underscores the need for homegrown solutions. While YC alumni like Aboyeji continue to emphasize the value of international programs, they are also building institutions that prioritize Africa’s unique needs. Whether through fostering AI innovation or rethinking funding models, the next chapter for African startups may not depend on Silicon Valley but on the ingenuity and resilience of the continent itself.

The Consumer Financial Protection Bureau (CFPB) announced on Friday that it has placed Google’s payment arm under federal supervision, a decision that has sparked significant controversy and led Google to file a lawsuit seeking to block the move. The supervision would subject Google to the same level of scrutiny as major banks and financial institutions, allowing the CFPB to inspect its operations for potential legal violations. This decision is part of the CFPB’s broader effort to extend its oversight to payment and digital wallet services through recently finalized regulations. The CFPB clarified that being placed under supervision does not necessarily mean that the company has engaged in illegal activities. However, the bureau stated that such a designation suggests the company may pose risks to consumers. In Google’s case, the CFPB cited specific complaints, including allegations that the company failed to adequately investigate or explain disputed transactions and did not implement reasonable measures to prevent fraud. These consumer protection concerns appear to have been a key factor in the CFPB’s decision. Google has strongly pushed back against the bureau’s actions. According to Reuters, the tech giant’s lawsuit argues that the CFPB is basing its decision on a small number of unsubstantiated complaints related to Google Pay. The service, which previously allowed peer-to-peer payments, was discontinued as a standalone app in the United States earlier this year. A Google spokesperson criticized the CFPB’s move as “government overreach” and emphasized that Google Pay posed no risks to consumers while it was operational. The CFPB’s announcement also revealed that it had been negotiating with Google for months before making the decision to impose federal supervision. Despite these discussions, the move has escalated tensions between the bureau and the tech giant, marking another flashpoint in the ongoing debate over regulatory oversight of large technology companies. The legal battle could have broader implications for the tech industry, especially as regulatory agencies increase their scrutiny of digital payment systems and other emerging financial technologies. Google’s lawsuit is likely to challenge not only the CFPB’s specific actions but also its broader authority to regulate tech-driven financial services. Adding further uncertainty, the political landscape could shift the trajectory of this case. With Donald Trump’s presidential administration set to assume office in January, there is speculation that the CFPB’s decision might be reversed. The Trump administration has historically been critical of overregulation and might take a less aggressive approach toward large corporations like Google. Regardless of the outcome, this case underscores the growing tension between regulators seeking to expand their oversight of tech companies and the companies themselves, which often view such measures as excessive interference. It also highlights the challenges of balancing innovation with consumer protection in an increasingly digital financial landscape.