Things happen, startups fail, life goes on. That may come across as cliche and perhaps a tad cavalier, but that’s pretty much the way things turn out sometimes.
Well, nobody ever sets out to build something that would ultimately flop but the harsh reality is that, more often than not, startups do fail. As a matter of fact, startups are more likely to fail than they are to succeed. At least, that’s what is implied when the statistic that says “about 90 percent of all startups fail” comes to mind.
And in a nascent startup ecosystem like Africa’s, where pro-startup resources can be hard to come by, failures are even more common.
Over the course of the last 10 years, the tech/startup ecosystem in Africa has gone from virtually non-existent to remarkably budding.
Record funding amounts have been raised year-on-year, Silicon Valley venture capital has arrived, some countries have enacted Startup Acts, tech innovation hubs have sprung up from everywhere, and so have incubators, accelerators, and ideathons.
Undoubtedly, the African startup ecosystem has witnessed great progress over the course of the past decade. But it would be naive to think that things have been generally rosy for startups in the ecosystem.
For every Flutterwave that went from zero to a hundred in a flash, there’s a DealDey that didn’t quite cut it until it was eventually chewed up and spat out by the ecosystem. Yes, it’s kind of a mixed bag — there are just as many strawberries as there are rutabagas.
And now we try to pick out the rutabagas. Here’s a look at some of the high-profile African startups that closed shop in this decade.
- Afrostream (Cameroon, 2014-2017)
Afrostream kicked off in 2014 as a subscription video-on-demand startup that was big on Afro-American and African movies. Tonje Bakang, the Cameroonian entrepreneur who founded the startup, may have been looking to pull off a Jason Njoku, but it appears that didn’t quite pan out.
Barely two years after launching, the Y Combinator-backed startup which had also raised funding from five other investors, had to call it quits.
In a post put together by the startup’s founder, it was revealed that Afrostream was cut short because the startup couldn’t afford to raise further funding to raise funding to finance the content acquisition.
Bakang also revealed that he had made efforts to find buyers for the startup but that too proved futile. As things turned out, Bakang had to pull the plug on the startup having failed to mount a serious challenge as a competitor to Jason Njoku’s iROKO.
- DealDey (Nigeria, 2011-2019)
The announcement of the closure of DealDey was made in January this year. The startup was founded as a daily deals platform by Sim Shagaya — the Nigerian serial entrepreneur who recently raised USD 3.1 Mn for his current edtech venture, uLesson.
As of 2015, DealDey was in league with the biggest e-commerce players in Nigeria and the startup even managed to gobble up a USD 5 Mn investment from Kinnevik. But it didn’t take long before things started to go downhill.
A combination of factors including market uncertainties and the apathy surrounding Nigerian e-commerce at the time resulted in a cash purge that forced the company to lay off 60 percent of its staff towards the end of 2015.
Early the following year, it was reported that DealDey had been acquired for USD 5 Mn by Ringier Africa. But there was to be no salvation as the company appeared to have gone beyond redemption at that point.
With the likes of better-funded though struggling competitors like Jumia and Konga breathing down its neck, DealDey huffed and puffed until January 2019 when it closed shop.
- Wala (South Africa, 2017-2019)
Wala, a South African crypto startup with operations in Uganda, rapidly rose to prominence after raising USD 1.2 Mn in a 2017 initial coin offering (ICO) and a further USD 1 Mn seed round raised from investors like Vinny Lingham’s Newtown Partners.
Using the crypto-powered payments app, a user in South Africa could pay their mom’s electricity bill in Uganda. And for a while, things worked so well. But the startup’s demise was just as swift as its rise.
Despite gaining early traction in facilitating remittances and other small payments for Africa’s underbanked, Wala was effectively broke by early 2019, laying off its staff and closing access to the company’s flagship app in February. Many had described Wala as Africa’s perfect crypto success story until things went south.
In a blog post put together by CEO, Tricia Martinez, in June, the startup’s failure was blamed on Africa’s poor infrastructure.
Additionally, in an interview with Decrypt, Wala co-founder, Samer Saab, also claimed new Ugandan regulations and unreliable internet infrastructure sparked an exodus of users from the nascent platform.
But the views from many other sources familiar with the company attribute the failure to lavish spending on the part of the founders and the absence of a revenue model.
- Efritin (Nigeria, 2015-2017)
Efritin suspended operations in 2017 amidst complaints of poor internet penetration and adoption, high cost of data, and the challenging prevailing economic headwinds in Nigeria, as factors that forced its demise.
The startup came to life in 2015 as an e-commerce platform for used goods with the backing of the Swedish company, Saltside Technologies.
Nils Hammer, CEO of Efritin’s parent company, was in charge of the startup for most of its time in Nigeria and it was he who listed all the factors above as reasons the startup couldn’t hold its own.
But there was another interesting take on the matter from a from an insider — Uche Ajene, a former marketing manager at Efritin — who blamed the company’s demise on the Somalian national who formerly managed Efritin.
That manager was Zakaria Hersi and Ajene accused him of stealing thousands of dollars, enabling internal mismanagement and creating false invoice trails to cover his tracks.
- OyaPay (Nigeria, 2017-2019)
OyaPay started on a promising note in 2017 as a Nigerian fintech platform for offline businesses to accept payments and take forward orders from their customers with or without a smartphone. The startup was established by a trio of co-founders with Abdulhamid Hassan serving as CEO.
After initially hitting the ground running, the startup reached an abrupt end in February 2019 and the reason for the closure was kind of unusual.
According to Hassan, who eventually joined another Nigerian fintech, Paystack, as Project Manager before going on to co-found his current venture, Voyance, OyaPay had to close shop due to what appears to be a family squabble.
It turned out that Hassan had taken a small seed round from an uncle of his who wouldn’t budge when the need to dilute the investment arose.
OyaPay had reached product-market fit and there was a need for further investment but the family member whose money he had taken to finance the company at the seed stage didn’t agree to dilute his investment. The matter dragged on for months until the startup eventually shut down.
- Bkam (Egypt, 2012-2016)
Bkam kicked off operations in October 2012 and the startup took pride in being one of the first price comparison websites in not just Egypt but the entire MENA region.
The startup was founded by Mahmoud Abdel-Fattah and it held its own quite well in the beginning, even expanding into Saudi Arabia and the UAE at one point.
During its prime days, it seemed that funding was easy to come by — the startup raised funding from the likes of Jabbar Internet Group and angel investor, Ahmed Osman.
But things started to go sour shortly after the arrival of new players like Pricena and Yaoota, both of which are still running till date.
Bkam was unable to keep up with the competition and the startup soon ran out of funds trying to stay in touch. And so it happened that Bkam suspended operations in February 2016 as the startup had well and truly gone broke.
In an interview with MENAbytes, Bkam’s founder, Mahmoud, revealed that he had to close shop because funding, which seemed to have been easy to come by in the beginning, eventually became hard to come by.
During a particularly difficult four-month period, Mahmoud pretty much exhausted the company’s money and his personal funds before seemingly disappearing to catch a break.
Featured Image Courtesy: startupAFRICA