{"id":2631,"date":"2022-01-25T10:44:27","date_gmt":"2022-01-25T09:44:27","guid":{"rendered":"https:\/\/ancstockinvestments.com\/blog\/?p=2631"},"modified":"2022-01-25T10:44:44","modified_gmt":"2022-01-25T09:44:44","slug":"ycs-new-deal-could-make-africas-investors-think-longer-term","status":"publish","type":"post","link":"https:\/\/ancstockinvestments.com\/blog\/2022\/01\/25\/ycs-new-deal-could-make-africas-investors-think-longer-term\/","title":{"rendered":"YC’s New Deal Could Make Africa\u2019s Investors Think Longer Term"},"content":{"rendered":"\n
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As the most prominent startup accelerator in the world for the last two decades, Y Combinator influences how early stage tech companies receive money from investors.<\/p>\n

After it announced a new standard deal<\/a> two weeks ago\u2014which will now offer startups $500,000 in two tranches instead of $125,000\u2014investors in the US<\/a>, and Europe<\/a>\u00a0 have wondered what they would have to do to not be priced out of the most promising startups in their respective markets. Initial reactions reveal anxiety in those who think YC\u2019s attempt at increasing its ownership in startups could work against those startups\u2019 ability to raise funds from other willing investors.<\/p>\n

But investors in Africa seem to be optimistic about the challenge of showing their knowledge and willingness to back founders long term.<\/p>\n

\u201cI see folks complain about the high valuation when they come in after a global accelerator and we at Microtraction can\u2019t relate,\u201d says Dayo Koleowo, managing partner at Microtraction, a firm that has invested in some Nigerian YC alumni including genomics research company 54gene<\/a>, and Lemonade Finance<\/a>, a remittance company for Africa\u2019s diaspora.<\/p>\n

Microtraction\u2019s model is to invest a minimum of $25,000 very early before startups join accelerators like YC, and it has done 19 of such deals, Koleowo says. His antidote to YC anxiety is for investors to \u201cfind [startups] early, back and support them, do follow-ons if you can and stop complaining.\u201d<\/p>\n

Also Read: Two and Three-Wheeled Electric Vehicles are on the Rise in Africa<\/a><\/h5>\n

Rethinking Y Combinator\u2019s role in Africa\u2019s startup scene<\/b><\/h2>\n

Since it invested in Paystack in 2016, YC has admitted over 70 African startups<\/a> into its famed three-month program, with Nigeria dominating the sub-Saharan African contingent. 4 out of 7 startups listed in the present winter batch<\/a> are Nigerian.<\/p>\n

The novelty of being admitted to YC is probably fading, especially since the program has been fully remote for two years due to covid-19, but African startups remain excited about being selected<\/a>. Founders see it as validation that they are, according to YC\u2019s motto, \u201cmaking something people want\u201d and stand a good chance of success.<\/p>\n

But the problem with this thinking is that some US investors interested in Africa would wait for the YC signal before parting with their money. Kyane Kassiri, a Tunisian venture capitalist, touched a nerve last year with a conversation about \u201cYC puppies<\/a>.\u201d Without dedicated Africa teams that understand the early stage startup landscape, such investors only go where YC goes.<\/p>\n