Last month, Y Combinator he said he had intentionally reduced his summer cohort by 40%. According to the accelerator, the decision to reduce the size of the S22 lot, significantly smaller than its most recent lots, was a result of the economic downturn and changes in the business financing environment this year.
It was the latest in a series of crash events, layoffs and hiring freezes with which the tech world had become all too familiar, and to some, it came as no surprise.
YC’s summer cohort includes 240 companies, notably smaller than its winter ’22 class which had 414 companies. So it didn’t come as a surprise to anyone that this reduction trickled down to other regions; for example, eight startups in Africa stepped on the gas this summer compared to 24 in the previous batch, representing a 60% reduction. While the region accounted for about 6% of the entire winter batch, it is 3% for this batch.
When YC went remote during the pandemic, the number of companies it accepted in subsequent batches starting in the summer of 2020 skyrocketed, as did the number of African startups. While this summer batch is still remote, this is YC’s first in-person batch in the past two years: About 30% of the batch moved to the Bay Area during their three-month program, and about 23% I was already in the Bay Area when they applied to YC. Therefore, it is plausible that being a face-to-face event has led to fewer African startups.
All eight companies in this summer batch say they are remote. But from a purely geographical point of view, five are based in Nigeria, one in Kenya and one in Ghana, and one, although focused on Africa, is based in Geneva. They appear to address challenges related to access to financial services and payments, food delivery, business accounting, and wholesale car purchasing.
Fintech… and others
Fintech is the most popular startup segment in Africa, and startups here make up the largest percentage of any typical YC cohort; in this case, five out of eight are fintechs. The most financed sector in Africa is also fintech. One of the reasons it attracts the most VC dollars is how expensive it can be to build a fintech product when factors like integration, compliance, and licensing are considered.
Globally, Bank-as-a-Service (BaaS) platforms such as Unit and Treasury Prime have helped start-ups scale to thousands of customers. And as financial services proliferate in Nigeria and the rest of Africa as well as the rest of the world, it stands to reason that startups offering neobanks and integrated financial services will rely on BaaS platforms like Anchor, one startup in this batch, to launch quickly.
Meanwhile, Bridgecard, an Anchor partner, provides card issuance APIs to allow businesses to create virtual or physical cards, one of many neobank offerings in Africa. And speaking of neobank offerings, Moneco, launched by three founders with finance and payments backgrounds, targets immigrant communities in Europe, starting with the African diaspora. On the other hand, Pivo (the second all-female-founded team in a single batch since Tress, a defunct social community for black women’s hairstyles, in 2017) focuses on cargo shippers in Africa.
While Pivo helps small and medium-sized businesses in the space cargo with cash flow issues by providing bank accounts, Patika aims to solve the same problem for a larger segment of businesses with its SaaS accounting tool.
Africa will reportedly be home to the second-highest number of vehicle owners in the world by 2050, with 400 million vehicles spending more than $1,000 annually on vehicle parts. That’s a big market that YC hopes Garage Mobility can be a dominant player in for years to come. He also talks about how YC is betting big on the African auto parts distribution chain, having backed Mecho Autotech, whose business model is more retail-focused and leans towards auto maintenance and repairs as opposed to the more retail-focused Garage wholesaler, in the previous summer batch.
YC ???? Africa’s food delivery space
Another segment that catches YC’s attention in Africa is the food delivery market. In the wake of DoorDash’s IPO, YC seems determined to replicate that success in other markets, including Africa. The accelerator supported beU delivery, a food delivery app in Addis Ababa, Ethiopia, and an identical platform, Heyfood, based in Ibadan, Nigeria, in this year’s winter batch. Chowdeck and Foodcourt mark YC’s third and fourth bets in successive runs.
“When it comes to ‘bets’, a reminder that we don’t invest because of sector/category/idea; only the founder. So the trends in the verticals you’re seeing are coming from the founders and the areas they’re looking for/finding problems in, and we found great ones that were working in the foodtech space,” the YC spokesperson said when asked about the trend. throttle. investments in the four platforms in two cohorts.
Revenue in the Africa online food delivery segment is projected to reach more than $2 billion by next year. Despite facing poor logistics infrastructure and an unpredictable regulatory environment, platforms like Jumia Food, Bolt Food, and Glovo have stepped up their efforts to gain market share. Although these semi-incumbents have bigger war chests than YC newcomers Chowdeck and Foodcourt, in their respective profiles, they have different levels of traction to prove they can fight in the hyperlocal online food delivery space. That is a space to keep in mind in the future.
