IFC launches new venture capital platform
To help build the digital economy in Africa, the Middle East, Central Asia, and Pakistan, IFC has launched a new $225 million platform to strengthen venture capital ecosystems and invest in early-stage companies.
In 2021, these regions collectively received less than 2% of $643 billion 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.
”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 start-ups 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 be backed by an additional $50 million 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 mobilise capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.