"Bongani Sithole, CEO of 54 Collective, stated that the Mastercard Foundation did not rescind their agreement due to any violations."
In a significant turn of events, Mastercard Foundation withdrew its funding from Africa Founders Ventures (AFV) and its venture studio 54 Collective in early 2025, citing financial mismanagement, conflict of interest, and unauthorized spending.
The withdrawal of funds, which totaled $106.5 million over five years, was committed in January 2023. However, the strain between Mastercard Foundation and AFV began in July 2024 due to the unapproved rebranding of Africa Founders Ventures to "54 Collective."
The review conducted by Deloitte, acting as Mastercard Foundation's auditor, between November 2024 and February 2025, uncovered several concerning issues. AFV had no audited financial statements for 2023 or 2024, over 2,000 backdated journal entries distorted the true grant-income picture, and $4.59 million had been transferred from AFV's Standard Bank account to one controlled by Founders Factory Africa.
The review's findings led to Mastercard Foundation issuing a 90-day notice to terminate the grant agreement with AFV on January 30, 2025. Despite AFV's initial agreement to repay the funds on February 17, they later called immediate repayment "reckless trading."
The withdrawal and subsequent shutdown of 54 Collective had a severe impact on Africa’s tech ecosystem. The liquidation disbanded 54 Collective's tech, HR, and growth teams, leaving over 40 startup portfolios without critical support overnight. It created fear and caution among impact investors due to the high-profile governance failure.
Although one of 54 Collective’s venture funds (UAF1, USD 40 million) survived, it now operates under a cloud of financial and legal uncertainties. The failure damaged confidence in the venture studio model which 54 Collective pioneered in Africa.
A rescue practitioner, Barry Urban, was appointed on March 31. Urban, who was tasked with winding down AFV, earmarked $3.2 million of the foundation's funds to cover expenses. However, $1 million of the requested winddown fees could not be adequately accounted for by Urban.
On March 20, Mastercard Foundation's Canadian legal counsel ordered AFV to cease interfering with records and reinstate Deloitte's access. Mastercard Foundation asked AFV's banks to freeze the accounts, but a court order was required under South African law.
In October 2024, AFV acknowledged the misstep and proposed the appointment of a compliance officer. Despite this, the first tranche of $19 million was disbursed later that year, and the grant agreement formally terminated on April 30, but AFV retained control of the funds.
The failure of AFV and 54 Collective serves as a stark reminder of the importance of financial transparency and adherence to grant conditions in the tech ecosystem.
[1] News Article 1 [2] News Article 2 [3] News Article 3
- The $106.5 million funding committed by Mastercard Foundation to startups through Africa Founders Ventures (AFV) and its venture studio 54 Collective was abruptly withdrawn in early 2025, due to financial mismanagement, conflict of interest, and unauthorized spending.
- In a blow to Africa's tech ecosystem, the withdrawal of funds and subsequent shutdown of 54 Collective disbanded its tech, HR, and growth teams, leaving over 40 startup portfolios without critical support overnight.
- venture capitalists, investors, and impact investors have expressed caution due to the high-profile governance failure at 54 Collective, which could impact personal-finance decisions in the tech sector.
- The failure of AFV and 54 Collective underscores the necessity of financial transparency and adherence to grant conditions in the finance and technology industries, particularly in education-and-self-development and sports-related startups.
- As a result of the failure, the future of 54 Collective's surviving venture fund, UAF1 ($40 million), remains uncertain, shrouded in financial and legal uncertainties.
- The failure has also led to increased scrutiny of venture studios and the venture capital industry, with experts emphasizing the importance of good governance and efficient financial management to ensure long-term success.
