Africa’s startup funding crisis deepens as Mastercard Foundation exits top VC firm

The Mastercard Foundation has withdrawn from its $100 million funding commitment to the African venture capital firm 54 Collective, a decision that has sparked discussions among African entrepreneurs about reducing reliance on Western philanthropic investments.

At a time when African tech startups are struggling to attract Western investors, the decision to end this partnership leaves a significant gap in the ecosystem. 54 Collective, recognized as the most active investor in Africa in 2024, confirmed in an email to Rest of World that its collaboration with Mastercard Foundation will officially conclude on April 30, 2025, as both entities pursue separate strategic directions.

The decision has created uncertainty within the African startup scene. During an internal meeting on February 20, 54 Collective’s leadership team informed employees that the funding cut would lead to layoffs, particularly affecting the firm’s venture studio team. This division, which provides critical support to startups in areas such as product development, technology, marketing, growth strategy, human resources, and business development, will be disbanded. Three senior officials who attended the meeting anonymously disclosed these details to Rest of World, as they were not authorized to speak to the media.

Despite this shift, Mastercard Foundation’s Executive Director for Pan-African Programs, Daniel Hailu, reassured that startups currently within the program would continue receiving technical assistance from 54 Collective’s Venture Studio until April 30, 2025. He further emphasized that the foundation remains dedicated to its Young Africa Works strategy, which aims to enable 30 million young people, especially women, to secure dignified employment by 2030.

The decline in startup funding in Africa, a trend that has been ongoing since 2022, has caused concern among entrepreneurs and investors. The withdrawal of a major funding commitment such as this could further dampen investor confidence.

Alim Ladha, CEO and founder of South African edtech company Instill Education, described the development as one that leaves a considerable gap in Africa’s entrepreneurial ecosystem. He pointed out that many of the startups supported by 54 Collective may not yet be self-sustaining, making the loss of this backing particularly impactful.

“In the short term, this is going to result in value destruction,” Ladha said. “Many of the startups that have received funding and support from this initiative are likely not at a stage where they can sustain themselves independently. The bigger question is, in the absence of such funding, who steps in to fill this gap and drive growth?”

Iyinoluwa Aboyeji, managing partner at startup accelerator Accelerate Africa and co-founder of the fintech unicorn Flutterwave, was more critical, asserting that African entrepreneurs need to stop relying on global institutions whose commitments can be unpredictable.

“It’s time for our ecosystem to stop depending on the broken promises and shifting mandates of globalist institutions and foundations that seem more interested in keeping African founders in financial distress rather than empowering them,” Aboyeji told Rest of World.

The challenges with international investment in Africa have been evident for some time. Several global investors withdrew from the continent during the 2022 funding downturn and have not returned. A notable example is Tiger Global, which invested in five African startups in 2022 but has since halted new deals on the continent.

In 2024, overall investment in African startups fell by 25% year-on-year, totaling $2.2 billion.

Founded in 2018 and headquartered in South Africa, 54 Collective has backed over 70 startups and is known for its unique hybrid approach, combining venture capital with a venture studio model that offers both funding and mentorship to early-stage founders. The firm collaborates with corporate giants and impact investment firms to deliver its services, with partners including South Africa’s Standard Bank, healthcare company Netcare, and Dublin-based Small Foundation.

In August 2023, 54 Collective secured its largest-ever funding commitment when Mastercard Foundation and Johnson & Johnson Impact Ventures pledged $114 million to support its unconventional VC model and expand its reach across Africa. Under this agreement, 54 Collective was set to receive $20 million annually from the Mastercard Foundation over five years.

In its email to Rest of World, 54 Collective acknowledged that Mastercard Foundation’s investment was vital to its operations. While senior executives indicated that the firm is likely to scale down its core investment team in Kenya, Nigeria, and South Africa, the company insisted that it will continue to invest in startups.

Mastercard and its philanthropic arm have played a significant role in Africa’s tech sector in recent years. Beyond 54 Collective, Mastercard has invested in major African companies such as Jumia, Airtel Africa, and MTN Mobile Money.

Victor Asemota, a partner at AnD Ventures, previously credited Mastercard and Visa for revolutionizing digital transactions in Africa, making business operations on the continent more efficient. “Before their involvement, the African payments landscape was chaotic,” Asemota told Rest of World last year. He pointed to how early attempts, such as Interswitch’s magstripe cards, failed due to a lack of compliance with global EMV (Europay, Mastercard, and Visa) standards, and how Mastercard and Visa introduced much-needed structure.

Mastercard Foundation also operates the Africa Growth Fund, a fund-of-funds initiative designed to support SMEs across Africa. This program aligns with the foundation’s mission to create dignified employment opportunities for young Africans, particularly women. Apart from 54 Collective, the foundation has invested in at least five other African investment firms, including Nigeria’s VestedWorld and Aruwa Capital Management, as well as Kenya’s Chui Ventures.

Ladha emphasized that this situation should serve as a wake-up call for African entrepreneurs to shift away from dependency on philanthropic funding.

“A few years ago, before COVID-19, philanthropy was heavily focused on education and youth employment,” he observed. “Then, during the food crisis brought on by the pandemic, funding shifted towards food security. Later, it pivoted to agritech, and then climate tech became the buzzword. What we are now realizing is that relying on philanthropy to sustain businesses is simply not a viable long-term model for Africa.”