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YC’s latest batch cuts African startup presence by more than half • Technology Flow

Last month, Y Combinator It says it intentionally cut its summer cohort by 40%. According to the accelerator, the decision to scale back the S22 batch — much smaller than its recent batches — was a result of the economic downturn and changes in the venture funding environment this year.

It’s the latest in a series of down-round, layoff and hiring freeze events that the tech world is all too familiar with — and to some it’s no surprise.

YC’s summer cohort included 240 companies, much smaller than the winter ’22 class, which had 414 companies. So it should come as no surprise to anyone that this reduction has crept into other areas; For example, eight startups in Africa entered the accelerator this summer, representing a 60% reduction compared to 24 in the previous batch. While this area represents 6% of the total winter batch, it is 3% for this batch.

When YC went remote during the pandemic, the number of companies accepted in subsequent batches from summer 2020 increased and so did the number of African startups. Although this summer batch is still remote, it’s YC’s first in-person batch in two years: About 30% of the batch moved to the Bay Area during its three-month program, and about 23% were already in the Bay Area when they applied to YC. Therefore, it is plausible that the individual event led to fewer African startups.

All eight companies in this summer’s batch said they were remote. But from a purely geographical perspective, five are in Nigeria, one each in Kenya and Ghana and one, though Africa-focused, in Geneva. They face challenges related to financial services and payments, food distribution, merchant bookkeeping and wholesale automobile purchasing.

Fintech et al

Fintech is Africa’s hottest startup segment, and startups here make up the highest percentage of any typical YC cohort — in this case, five out of eight are fintechs. Fintech is also the most funded sector in Africa. One of the reasons it attracts so much VC dollars is how much it costs to build a fintech product when things like integration, compliance and licensing are taken into account.

Globally, banking-as-a-service (BaaS) platforms, such as Unit and Treasury Prime, have helped start-ups grow to thousands of customers. As financial services expand in Nigeria and across Africa, like the rest of the world, it is logical for neobank and upstarts offering embedded finance services to rely on BaaS platforms like Anker to get off the ground quickly.

Meanwhile, Anchor’s partner BridgeCard provides card-issuing APIs to allow businesses to create virtual or physical cards, one of many Neobank offers in Africa. And speaking of Neobank’s offerings, Moneco, started by three entrepreneurs with backgrounds in finance and payments, is targeting migrant communities in Europe, starting with the African diaspora. Pivo, on the other hand (the second female-founded team in a single batch after Tres, a social community for black women’s hairstylists in 2017) is focused on freight carriers in Africa.

While Pivo helps small and medium businesses in the freight space with cash flow issues by offering bank accounts, Patika aims to address the same problem for large segment businesses with its SaaS bookkeeping tool.

According to reports, Africa will have the second largest number of vehicle owners in the world by 2050, with 400 million vehicles, spending $1,000 a year on auto parts. That’s a vast market where YC hopes Garage Mobility will be a dominant player for years to come. It also speaks to YC betting big in Africa’s auto parts distribution chain as it backed Meco Autotech – in the previous summer’s batch – whose business model is more retailer-centric and leans towards auto maintenance and repairs compared to Garage’s wholesale focus.

YC 🤝 Africa Food Delivery Space

Another segment that attracts YC’s attention in Africa is the food delivery market. On the back of DoorDash’s IPO, YC is poised to replicate that success in other markets, including Africa. The accelerator has backed Beu Delivery, a food delivery app in Addis Ababa, Ethiopia, and Hayfood, a similar platform based in Ibadan, Nigeria. Choudek and Foodcourt represent YC’s third and fourth bets in batches, respectively.

“A reminder that when it comes to betting, we don’t invest because of sector/category/idea; Totally entrepreneurial. So the trends in verticals that you’re seeing come from the entrepreneurs and the areas they’re following/discovering problems — and we’ve found great people working in the food tech space,” said a spokesperson for YC when asked about the accelerator. Investments in four platforms across two groups.

Revenue in Africa’s online food delivery segment is expected to reach $2 billion next year. Despite facing poor logistics infrastructure and an unpredictable regulatory environment, platforms such as Jumia Food, Bolt Food and Glovo have stepped up efforts to capture market share. While these semi-incumbents have larger war chests than the YC newcomers, Choudek and Foodcourt, in their respective profiles, have varying degrees of traction to show they can contend in the hyper-local online food delivery space. It is a place to watch in the future.

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