Y Combinator Challenges African Union with $1 Billion Fund

First, do not be so excited. Y Combinator, the legendary U.S. startup accelerator, does not have the contact of the African Union to challenge it for anything. But whether it does or not, Y Combinator is putting the world on notice: America is well prepared to lead the innovation battle of this century. If not, how can you explain for a company, at its focused-level of investment, to be raising $1 billion?

TechCrunch reports that the accelerator is raising $1 billion, after a mere two years of closing $700 million fund.

Silicon Valley startup accelerator Y Combinator is raising up to $1 billion for a new venture capital fund, Axios is reporting this morning. The fundraising comes less than two years after YC announced the close of its first big investing vehicle, a $700 million growth fund called the Y Combinator Continuity fund that it hired Ali Rowghani to oversee.

This is huge and this will ensure the next generation of companies, indeed future Dropbox, Facebook, and Google, will be seeded in America. America is such a blessed country that its private companies can drive such national agenda. It is simply unprecedented at the scale they do this. As their President tweets tonight, he knows that some people are holding up for America, irrespective of whatever he will do tomorrow.

The Challenge for Africa Union

This is a direct challenge to the African Union. This is not talk and no action. We hear it all time: “we need to grow our startups” and everyone goes home from Addis Ababa, and nothing happens. Capital is required to make it happen. African Union should take the challenge by asking member countries to designate at least 1% of their budgets for investments in technology startups. As soon as that money is available, the government should give it to Venture Capital (VC) funds in the specific African country as loans, at 5% interest rate, for ten years. Then, the government should guarantee 75% loss on behalf of the funds, as they invest in startups.

The 5% is to make sure the fund costs the Funds something. That will give them incentives to work to cover the costs. Guaranteeing 75% of their exposures will enable them to take risks but also make sure they pay consequences if those risks fail since they have to account for 25%.

Finally, government should offer zero taxation to all the VC funds, for ten years, with mandate that all those forgone taxes must be put back into investments.

This should become an AU policy point. It is very critical because despite the fact that these technology companies are simplifying lives and making everyone happy, there are winners and losers, at government-levels. This is one way we can catch-up as the level is not even: Microsoft generates Nigeria’s total budget within 3 months.

Microsoft’s net income more than doubled to $6.51 billion or 83 cents per share in the quarter, from $3.12 billion or 39 cents per share in the year-earlier period. Excluding one-time items, Microsoft earned 98 cents per share. On an adjusted basis, revenue rose 9.1 percent to $24.7 billion.

Behind Tech Win-Win

Nearly all consumers win, because technology simplifies our lives. However, technology has shown that those that incubate and own the companies gain more. What they do is to make everything better, but those actions have consequences. We cannot use bad policies to stop value from technology, but we must work hard to ensure we compete in the space.

As most American cities have noted that despite the cheap products on Amazon, they could suddenly live without good schools because Amazon.com had out-competed those physical stores that provide the real estate tax that fund schools. So, for them, we have the cheap products and great simplified lifestyles due to Amazon, but our cities are collapsing.

A scathing new report from the Institute for Local Self-Reliance (ILSR), which campaigns for sustainable local economies, argues for action to curtail Amazon’s influence. It compares Jeff Bezos to a “19th-century railroad baron controlling which businesses get to market and what they have to pay to get there,” and it argues regulators should break up the company, and that states should reduce tax breaks and subsidies that privilege the company over its competitors.

How do you react? You pursue innovation and challenge your young people. Because they do not have entities like Y Combinator, you make it a policy to seed them. This is a moment because Y Combinator will likely, through this fund, have a company that will be one of the winners in Artificial Intelligence, with consequences around the world.

We need to reply and build our institutions. This is serious, for an accelerator, to be raising $1 billion. It is a huge deal: Africa must act, immediately. Do not remind me that Y Combinator could be investing in African companies; I get that. But people, we need to do something on technology and plan how Africa could compete in this space. Foreign funds will not save us.We need to build indigenous funding capabilities.

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