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IFC launches new VC platform

Anna Lyudvig
Nov. 22, 2022, 4:45 p.m.
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IFC has launched a new $225m platform to strengthen venture capital ecosystems and invest in early-stage companies addressing development challenges through technological innovations in climate, health care, education, agriculture, e-commerce, and other sectors in Africa, Middle East, Central Asia, and Pakistan.

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IFC has launched a new $225m platform to strengthen venture capital ecosystems and invest in early-stage companies addressing development challenges through technological innovations in climate, health care, education, agriculture, e-commerce, and other sectors in Africa, Middle East, Central Asia, and Pakistan.

In 2021, these regions collectively received less than 2% of $643bn of global venture capital funding.

Access to capital has been exacerbated by a slowdown in global venture capital investment, the COVID-19 pandemic, the rise in food and supply chain costs, higher interest rates, and currency depreciation. 

In addition, tech ecosystems are nascent or even nonexistent outside of more established markets such as Egypt, Kenya, Nigeria, Pakistan, Senegal, and South Africa.

The growth potential, however, is enormous across these regions.

In Africa, for example, the digital economy has the potential to contribute $712bn to the continent’s gross domestic product (GDP) by 2050.

In the Middle East and North Africa, technology could boost GDP by 40%, or $1.6trn, and create 1.5 million manufacturing jobs in the next 30 years.

“Support for entrepreneurship and digital transformation is essential to economic growth, job creation, and resilience,” said Makhtar Diop, IFC’s Managing Director.

“IFC’s Venture Capital Platform will help tech companies and entrepreneurs expand during a time of capital shortage, creating scalable investment opportunities and backing countries’ efforts to build transformative tech ecosystems. We want to help develop homegrown innovative solutions that are not only relevant to emerging countries but can also be exported to the rest of the world.”

The platform aims to strengthen the regions’ nascent venture capital markets, which have demonstrated early growth potential but face challenging global economic conditions.

IFC will make equity or equity-like investments in tech startups and help them grow into scalable ventures that can attract mainstream equity and debt financing.

IFC will also use the platform to collaborate with other teams in the World Bank Group to create and bolster venture capital ecosystems through regulatory reforms, sector analyses, and other tools. The platform will also focus on investments in low-income and fragile countries and help generate a pipeline of credible early-stage companies.

The platform will build on IFC’s investments and efforts to build tech ecosystems in Africa, Middle East, Central Asia, and Pakistan through initiatives such as the IFC Startup Catalyst Program.

IFC has invested in companies like Twiga Foods, a Kenyan-based technology food distribution platform; TradeDepot, an e-commerce startup connecting international brands with African retailers; and Toters, a leading on-demand delivery platform in Lebanon and Iraq.

The platform will be backed by an additional $50m from the Blended Finance Facility of the International Development Association's Private Sector Window, which helps de-risk investments in low-income countries.

In addition, IFC will mobilize capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.

 

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