Afrigather - 9 Nigerian startups that collectively raised over $70 million within the final two years have shut down in 2023.
- The closures have raised issues concerning the destiny of different younger and progressive corporations searching for funding within the coming years.
- Whereas the businesses shut down beneath totally different circumstances, Enterprise capitalists argue that most of the failed startups acquired funding with out adequate due diligence.
- The VCs additionally recommend that previous funding selections have been rushed, emphasizing the necessity for startups to show stronger viability and meet increased requirements earlier than securing funding sooner or later.
Amid dwindling funding 9 Nigerian startups which have shut down this 12 months went beneath with over $70 million investor funds raised within the final two years.
Whereas the businesses caved in beneath totally different circumstances, their exit is already elevating issues over the destiny of many younger progressive corporations which can be nursing the ambition of elevating funds within the coming years.
For one, enterprise capitalists have agreed that sufficient due diligence was not carried out previously earlier than funds have been dedicated to many of the startups which have now failed.
This presupposes that any startup that may elevate funds within the coming 12 months must work more durable and tick many bins on the buyers’ desk earlier than a cheque may very well be signed.
From 54Gene, which had raised $45 million to Pivo Africa, which packed up after elevating $2.6 million from buyers, the 9 startups went beneath with tens of millions of buyers’ funds that will by no means be recovered.
The Failed Startups of 2023
Whereas the startup shutdown just isn’t peculiar to Nigerian startups as a number of corporations throughout Africa and globally collapsed this 12 months, Nigeria leads Africa when it comes to the variety of corporations that shut down this 12 months. As of the time of submitting this report, these 8 Nigerian startups have shut down this 12 months:
Pivo
Earlier this month, Pivo, a Nigerian fintech that provided banking companies to small provide chain companies, introduced it was shutting. This got here one 12 months after elevating greater than $2.6 million from Y Combinator, Ventures Platform, Mercy Corp Ventures, and over 15 different buyers.
Based by Nkiru Amadi-Emina (CEO) and Ijeoma Akwiwu (COO) in July 2021, Pivo raised a $100,000 pre-seed spherical from buyers like Microtraction, FirstCheck Africa, and Rally Cap Ventures two months after its launch.
It later raised a $2 million seed spherical in November 2022; on the time, Amadi-Emina stated the funds can be used to increase to East Africa and launch new merchandise round funds, a significant ache level for provide chain SMEs. Completely different accounts level to the founders’ battle as the most important explanation for the corporate’s collapse.
Lazerpay
After making the headlines as an organization based by 19-year-old Njoku Emmanuel and went on to lift $1.1 million, Lazerpay, a web3 crypto funds firm, on April 13, 2023, introduced it was shutting down, to everybody’s shock. This got here just a few months after the startup had laid off a few of its workers to increase its runway because it sought buyers.
Nonetheless, the anticipated further funding didn’t come.
- “At the moment, we announce the troublesome resolution to stop operations at Lazerpay. Regardless of our staff’s tireless efforts to safe the required funding to maintain Lazerpay going, we have been unable to shut a profitable fundraising spherical. We fought exhausting to maintain the lights on so long as doable, however sadly, we are actually at some extent the place we have to shut down,” Njoku stated as the corporate wound down.
54gene
54gene, a genomics analysis firm that had raised US$45 million throughout three funding rounds, revealed in September that it had began winding down its operations.
Lower than 4 years into its creation, the corporate fell into disarray, and Abasi Ene-Obong, its CEO, was changed in October 2022. Over the previous 12 months, 54gene had three CEOs, together with Teresia Bost and Ron Chiarello, who took workplace in March 2023. Chiarello left the function in July. Davidson Oturu, a enterprise capitalist, stated some founders began with good intentions however alongside the best way, the necessity to survive pushed them in direction of unethical practices.
Bundle Africa
Nigerian crypto startup Bundle Africa introduced that it will shut down its social funds app Bundle Africa. In a tweet asserting the shutdown, CEO Emmanuel Babalola stated that the shutdown was a call made by stakeholders who desire a restructuring of the corporate.
This got here after the corporate had raised $450,000 in a pre-seed that had participation from two buyers.
Nonetheless, not like others, buyers in Bundle Africa could not have misplaced all of it because the startup now focuses on Cashlink, its peer-to-peer platform. The corporate reportedly hit 50,000 month-to-month energetic customers and a $50 million month-to-month quantity on Bundle and crossed over 3 million transactions on Cashlink.
Payday
Equally, fintech firm, Payday, bumped into an issue barely 6 months after elevating $3 million in a seed spherical led by Moniepoint. The corporate’s founder and CEO, Favour Ori, was alleged to be paying himself a month-to-month wage of $15,000 on the expense of the corporate’s survival whereas staff have been made to take pay cuts. The corporate had additionally confronted severe allegations of fraud from clients as their accounts have been restricted with none rationalization till they cried out on social media.
Early this month, it was introduced that Payday has been acquired by Blockchain funds platform, Bitmama Inc.
Zazuu
Zazuu, a fintech firm based in 2018 by 4 Nigerian entrepreneurs, Kay Akinwunmi (CEO), Korede Fanilola (COO), Tosin Ekolie (CTO) and Tola Alade (CDO), shocked the tech and finance trade when it introduced on November 17, 2023, that it was shutting down operations.
The agency’s administration attributed the shutdown to its incapacity to safe further progress funding from buyers.
The corporate, an end-to-end cash switch market that facilitated remittance funds into Sub-Saharan Africa, had in July 2023, raised $2 million to deepen its cross-border cost providing and in addition construct the world’s first non-biased cost platform.
Angel buyers that participated within the fundraising spherical are Babs Ogundeyi, chief government officer of Kuda Financial institution and Jason Njoku, chief government officer of IrokoTV.
Different angel buyers embody Launch Africa, Founders Manufacturing unit Africa, HoaQ Membership and Tinie Tempah.
Whereas elevating the funds final 12 months, the startup assured that it will proceed to develop its consumer base, rent extra expertise, and scale its pay with the Zazuu function that enables customers to finish transactions in-app.
Vibra
Precisely two years in the past in December 2021, Nigeria-based African Blockchain Lab, Vibra raised $6 million in a pre-Sequence A spherical co-led by a consortium of worldwide buyers, together with famend African enterprise capital corporations Lateral Frontiers VC, CRE Enterprise Capital and Musha Ventures, in addition to worldwide blockchain buyers Dragonfly Capital, Hashkey Capital, SNZ Capital, Fenbushi, Cadenza Capital, Head & Shoulder X, LeadBlock, Hash World, Bonfire, Krypital, Despace and extra.
The funding was to see Africa Blockchain Lab roll add new options like VIBRA Earn, a crypto asset saving product that lets customers earn curiosity on a wide range of crypto property. Nonetheless, in July this 12 months, the corporate shut down its operations, not solely in Nigeria but additionally in Kenya and Ghana.
Okadabooks
Based in 2013 and a pioneer in digital publishing and bookselling, Okada Books, closed down in November this 12 months after 10 years of operation, citing tough macroeconomic situations.
- “We explored varied avenues to maintain our digital bookshelves alive however, sadly, the challenges we face are insurmountable,” stated Okechukwu Ofili, the corporate’s CEO, in a social media assertion.
In 2017, Okadabooks was amongst 12 startups chosen for Google’s Launchpad Accelerator Africa.
Hytch
In February, Nigerian logistics startup Hytch confirmed it had shut down barely 9 months after launch.
- “It has been a troublesome one however we’re shutting down operations lastly,” the corporate stated in a social media put up. We might not be offering our companies to companies or people,” the corporate stated in a press release.
The closure happened after it did not safe additional funding.
Time for due diligence
Disturbed by the speed of startup failure witnessed in Nigeria this 12 months, enterprise capitalists are blaming the event on the poor selections made by buyers within the final two years.
In line with a Companion at TLCom Capital, Eloho Omame, many of the offers introduced between 2021/2022 have been hurriedly sealed.
Indicating that many of the just lately failed startups have been backed by overseas buyers and never African VCs, she famous that “within the final couple of years, Africa-focused buyers turned comparatively much less common than our US/world counterparts, many investing on the continent for the primary time, typically with out an Africa mandate per se.”Attributing the current failures to the dearth of due diligence on among the startups by the buyers, Omame stated:
- “We frequently heard from founders that they weren’t asking ‘so many’ questions. They moved ‘quick’…from a dialog on a Friday to funds within the financial institution by Monday. It turned exhausting to ask curious questions and to take your time to get to know founders and their companies earlier than writing a verify.
- “Affordable inquiries have been a trouble, and affordable timelines have been perceived as an influence play. You risked dropping the deal. Otherwise you spent per week and plenty of sources doing ‘actual work’ solely to get a name that the spherical was full. Now that the mud is settling, I hope we are able to return to a greater dynamic—one which’s grounded in belief, openness, and mutual respect.”
She added that the narrative that “African buyers ask extra questions than US/world buyers” wouldn’t assist the trade. In line with her, founders ought to in all probability marvel if they matter if an investor doesn’t take the time to ask good questions.
Whereas advising African founders to see due diligence as a mandatory course of of their enterprise curiosity, Omame stated:
- “ due diligence course of shoots to grasp your small business and also you as a founder. Good buyers goal to steadiness that with optimizing for materiality, reasonableness, and, sure, tempo. The method can also be your likelihood to get to know the character and experience of the investor. No person is helped — not you or the investor — by optimizing for velocity.“Occasions are harder, sure, but when nothing else, this fundraising winter can also be a superb likelihood to reset and rediscover a more healthy, extra sustainable long-term dynamic between founders and buyers in Africa tech & VC.”
Corroborating Omame’s views, Founding Companion at Future Africa, Iyinolwa Aboyeji, famous that many of the big startup failures in Africa are from these backed by world VCs and never these led by African VCs.
- “They’re imported offers the place SV thought they may purchase their solution to success in Africa with sufficient capital. I additionally suppose we VCs can actually assist founders by serving to them perceive what we’re searching for within the diligence. A part of the hazard of the final two years of low cost capital is that plenty of founders suppose constructing an organization is a good pitch however there’s simply a lot extra to it,” he stated.
Different African startups which have shut down in 2023
Throughout Africa, the variety of startups which can be shutting down has continued to rise. In August, Kenyan end-to-end achievement startup Sendy shut down operations and introduced an property sale with studies saying lowered order volumes and gas worth hikes meant it was making deliveries at a loss, and had a month-to-month burn price of US$1 million.
Sendy raised US$20 million in capital as just lately as January 2020, however within the present local weather, additional funding was to not be discovered.
Ghanaian funds startup Sprint, based in 2019, had raised a whopping US$86 million, however folded in October amid allegations of economic impropriety and false reporting.
South African mobility startup WhereIsMyTransport, bankrolled to the tune of over US$27 million by buyers similar to Naspers lately, introduced it was closing down in October after failing to safe extra funding.
Kenyan B2B e-commerce startup Zumi had earlier in March introduced it had closed down after failing to safe the required funding to proceed operations. Launched in 2016, Zumi started life as a female-focused digital journal, earlier than pivoting into e-commerce in 2020.
In line with co-founder and CEO William McCarren, the startup achieved over US$20 million in gross sales, acquired 5,000 clients and constructed a staff of 150 individuals, however closed after failing to safe funding.
One other Kenyan e-commerce firm Copia, which raised US$50 million Sequence C funding final 12 months, introduced it was pulling out of Uganda, “in step with most of the greatest corporations in Africa and the world over that are responding to the market surroundings and prioritising revenue.”
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