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LAGOS, Nigeria — Venture capital funding is shrinking globally, but experts say a new $1 billion investment fund created by the United Nations Development Program for Africa’s technology ecosystem will We are optimistic that we will be able to protect companies from a decline in investment.
“The $1 billion Timbuktu Fund is a great initiative by the United Nations and probably the largest start-up fund in Africa,” said Richmond Ogigi, founder of WallX Africa, a Nigerian payments solution for African businesses. “We think this will also attract other investors, including domestic and international investors. We also believe this will be the catalyst to revive the funding ecosystem, which has been bearish for a long time.”
The fund is named Timbuktu, after Timbuktu, Mali, a famous cultural crossroads. (The city is currently largely closed to outsiders due to security concerns.) The fund plans to invest in 10,000 startups over the next 10 years, said Eleni, UNDP Africa’s chief innovation officer. Gabre-Madin said. She is leading the effort, which was recently launched at the World Economic Forum in Davos, Switzerland. The first $350 million pot will be stored at the Kigali International Financial Center in Rwanda.
“Our goal is to scale up at least 1,000 of those 10,000 people,” Gabremaddin said at Davos. “Our vision is for 1,000 startups to collectively impact 100 million lives and create $10 billion in value for the continent.”
Despite having a huge youth population of 1.3 billion, Africa contributes only 0.2% to global startup value, she said. This number is predicted to double by 2050. A total of 1,361 unicorns (private start-ups with a combined valuation of $1 billion) operate worldwide, but only seven of them are based in Africa. Six companies are financial technology companies. Jumia is an e-commerce company. Four of the seven companies are Nigerian companies, including Jumia.
US Secretary of State Antony Blinken happened to be visiting Nigeria last week on a four-country itinerary through parts of Africa. He met entrepreneurs in Lagos, the country’s commercial capital. Tweet Techmeisters are said to “unleash creative potential to solve big problems” and bring about positive change in the world.
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While the continent has the youngest population with an average age of 25, it is also the poorest, with approximately 431 million people living below the poverty line.
Rwandan President Paul Kagame said in Davos that “start-ups in Africa often lack the funding to compete at a global level.” He announced a $3 million donation toward this effort. “We cannot accept that the next generation of African youth will not have the tools to reach their full potential. With Timbuktu’s $1 billion goal, Africa create more opportunities for young people to put their talents and creativity to good use.”
Benjamin Dada, who heads a technology news platform in Lagos, said Timbuktu will provide Africa with a buffer as global venture capital funding continues to dry up. High interest rates, an uncertain economic environment and “the fact that zero interest rates have changed the access to capital that investors had” are contributing to the lack of foreign investment in Nigeria and Africa as a whole. Experts who spoke with PassBlue fear that Africa’s burgeoning startup industry will shrink if young entrepreneurs don’t have enough capital to build their businesses.
Timbuktu is trying to solve this deficit by attracting more local investors as an alternative to foreign direct investment. The total amount of funding and financing in Africa, a continent made up of 54 countries, is extremely low compared to other major regions, with the exception of South America. The continent garnered her $1.6 billion in global investments, compared to her $2.9 billion invested in Africa in the first and second quarters of 2023.
“Historically, access has been one of the main challenges in funding,” Dada said. “Also, the capital pool is not deep and limited. So even if there is access, investors may end up paying out their allocation to a particular fund before they can get the next startup. There’s also the issue of management. We’ve seen startups shut down due to poor practices, meaning that even if they can raise money, it’s hard to utilize that money efficiently. I can’t.”
UNDP’s Gabre Maddin said Africa is the only region in the world that is 89% dependent on foreign capital. The investment destinations are only four countries: Nigeria, Kenya, South Africa, and Egypt. The Timbuktu Fund will target thriving sectors within an ecosystem of selected hubs across Africa. Dada said this approach forces entrepreneurs to streamline their ideas and focus on sectors where they can raise money, rather than betting on multiple pitches in the hopes that one will stick. . Timbuktu will provide funding to local venture capital firms that know the market better than outsiders, he added.
WallX Africa’s Ogigai said this approach has been successful in shaping Nigeria’s technology ecosystem. “This will give confidence to foreign investors as well, so we expect a lot of participation from local investors,” he said.
Damilola Banjo is a staff reporter at PassBlue. She received her Master of Science degree from Columbia University Graduate School of Journalism and her Bachelor of Arts degree in Communication and Language Arts from the University of Ibadan, Nigeria. She has worked as a producer at NPR’s WAFE station in Charlotte, North Carolina. She is an investigative journalist for the BBC. She works as an investigative reporter for Sahara Reporters Media.
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