From Rough Stones to Gems: How YC is Accelerating Africa's Startup Boom
From Rough Stones to Gems: How YC is Accelerating Africa's Startup Boom
From Miden's virtual cards to Cleva's global payments: Meet the 2024 YC gems from Africa
I was researching my next article on Monday when I got a notification from Techcabal about Miden’s acceptance into the YCombinator’s Winter program (W24). “Ah, good for them”, I exclaimed. I am a big fan of YC and the impact of their work. The moment I saw the email notification I decided to put that article piece on hold and write something on YC’s impact on African startups.
Understanding YCombinator and its significance
For those who might not know, YC, short for YCombinator is what I like to call the “Harvard of startups”. YC is by far the biggest and most popular technology startup accelerator launched in 2005 and to date they have launched more than 4000 companies. Some notable names that have passed through YC include Dropbox, Stripe, Scale AI, Flutterwave, and Zapier.
So what is an accelerator program and what makes YC special? I suppose there’s nothing obvious that makes YC special as what they do is pretty much what most accelerators do. YC provides seed funding, mentorship, and resources to early-stage startups. The program lasts three months and is designed to help startups grow and succeed. YC invests $500,000, and the investment gives them 7% of your company plus an incremental equity amount that will be fixed when you raise money from other investors.
In addition, startups in YC get access to office hours with group partners who are experienced entrepreneurs and investors.
Ok, we get it YC is a cool place to be but how is it relevant here? Getting into YC is notoriously hard and getting in is a sure sign that you’re solving a pertinent problem to get their attention to get accepted into the program. Getting accepted into any accelerator program greatly improves the odds of a startup’s success and having that accelerator program be YC adds multiple points to a startup’s longevity. A good number of startups originating from Africa have made their way to the most exclusive startup club. Perhaps the most successful startup to come out of Africa that made it to YC is Nigeria’s Flutterwave, a startup we have mentioned several times in our past articles. However, they aren’t the only ones. Africa has had 90 startups get accepted into YC across a multidimensional array of industries with fintech taking 49 spots. 61 of the 90 startups that have made it to YC are from Nigeria. Why am I not surprised?
How YC Breeds Billion-Dollar Gems
It’s another argument altogether whether YC picks gems or they pick rough stones with potential and make them gems. For instance let’s look at the story of Paystack, Nigeria’s modern payments infrastructure company. Founded in 2015, the startup became the first Nigerian company to be accepted into YC in November of 2015. 9 years later, Paystack is now a part of the global payments platform - Stripe after their $200M acquisition in 2020. Along the way, Paystack raised $1.3 million in seed funding from Tencent. In 2018 they raised $8 million in Series A funding from Stripe. So good was their technology that 2 years later Stripe made an acquisition offer.
If you asked YC why startups should apply to their program, their simple response would be “Because we give companies a disproportionate advantage”. Disproportionate advantage you say? Well, can we see some numbers?
Flutterwave: A major African fintech company valued at over $3 billion, offering payment processing and other financial services.
Wave: A mobile money platform currently operating in Senegal and Côte d'Ivoire, with a valuation of over $1.5 billion.
Andela: A global talent network connecting African engineers with remote work opportunities, currently valued at $1.5 Billion after raising a $200 million Series E round from investors led by SoftBank Group Corp, the notorious Japanese tech investor.
It seems YC continues to double down every year on fintech startups coming out of Africa. We have payment problems in Africa indeed. There’s no one-size-fits-all solution and more room for more than 40 players promising unique solutions. The year 2022 is the year African startups showed up and showed off because that is the year Africa had the most startups participating in YC’s W22 and S22 sessions, with a total of 21 startups all of them in fintech.
It suffices to say COVID-19 exposed a lot about our state of financial technology, particularly for Nigeria as 16 of the 21 startups were from there. The COVID-19 pandemic was a trying time for a lot of people the world over. The pandemic exposed a lot of cracks in our systems, but it also brought about opportunities for growth and innovation. Because families back home in Africa needed to receive money sent by families from abroad, this realization led to ventures such as Moneco, a neobank for African migrants in Europe.
The year 2022 was a good year indeed for African startups, it is the year African startups received the most VC funding ever, a record figure of $5 Billion. This is also the year 38% of African developers worked remotely for an international organization based outside of Africa. These software developers needed to be paid at the end of the day and hence why startups such as Partna, Plumter, and Grey found themselves leading the charge in building solutions that will cater to the needs of remote workers.
The Future is Diverse and Bright
Building on the momentum of 2022 and 2023, African startups are entering 2024 with renewed energy and ambition. While fintech remains a strong focus, other sectors are also attracting investor attention, highlighting the continent's diverse entrepreneurial landscape. Fast forward to 2024, and Y Combinator's Winter program welcomes three promising newcomers: Miden, Cleva, and a yet-to-be-announced Kenyan travel tech startup.
Miden: A B2B fintech specializing in virtual cards and embedded finance solutions. They are achieving this thanks to their API. The startup launched in 2022. As of the end of year last year they had issued over 50,000 cards with monthly transaction volumes exceeding $1.5 million and a whopping 100% customer retention.
Cleva: Fairly new founded in August 2023 by Tolu Alabi and Philip Abel, former employees of Global payments giant Stripe and the number one cloud business, AWS. The Nigerian fintech startup claims to have processed over $1 million in monthly payments, experiencing a 100% month-on-month revenue growth. Speak of product-market fit, exactly what YC likes to hear when applying to them. Like many others before them, they seek to solve the problem of “how can we enable people to receive international payments” You’d think big banks would have solved this problem by now but nope, it is a sticky problem and as alluded in one of our articles, traditional banks don’t have the appetite for that kind of risk. In truth, the payment problem is not Nigerian or African, it is a global problem. Cleva believes it has the solution and the know-how to reach scale, but the starting point will be Nigeria because of its massive market and the founder’s background.
Concluding thoughts
Y Combinator's impact on Africa extends far beyond individual success stories. It challenges traditional narratives, fosters collaboration, and inspires a new generation of problem-solvers. The continent's challenges are vast, but its potential is even greater. As YC continues to nurture diverse talent and groundbreaking ideas, we must ask ourselves: what role can we each play in supporting this ecosystem and unlocking Africa's full potential to shape a brighter future?
Oh, and one more thing we are researching to understand the entrepreneurial landscape in the continent. To do this, we have created a neat Google form that will help us understand the challenges experienced by entrepreneurs. Click here to share your experiences as an entrepreneur in Africa.
Well, that’s it for this week. Stay caffeinated and entrepreneurial, my friends.
>>> Google Jr
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