World Bank Group member International Finance Corporation (IFC) has launched a $225-million venture capital platform that will invest in early-stage startups in what it described as underserved regions.
Specifically, IFC said the fund will invest in early-stage companies in Africa, the Middle-East, Central Asia, and Pakistan that address challenges in climate, healthcare, education, agriculture, e-commerce, and other sectors.
“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,” according to a disclosure.
The target regions collectively received less than 2% of the $643-billion global venture capital funding in 2021 and yet the growth potential is enormous in these areas, IFC added.
In Africa, for instance, the digital economy has the potential to contribute $712 billion to the continent’s gross domestic product by 2050.
Aside from making investments, IFC said it 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.
“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,” said IFC managing director Makhtar Diop.
He added that IFC will 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 venture capital platform adds to IFC’s Startup Catalyst Program, which is also building tech ecosystems in the target regions.
The programme has already invested in companies such as Twiga Foods, a Kenya-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 new platform has so far received an additional $50 million from the Blended Finance Facility of the International Development Association’s Private Sector Window.
IFC will also mobilise capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.
IFC is the largest global development institution focused on the private sector in emerging markets. In the fiscal year 2022, it committed a record $32.8 billion to private companies and financial institutions in developing countries.