Despite hopes for a reversal and calls for resilience, 2022 has been quite a dramatic year for the tech ecosystem. The economic downturn has manifested negative effects in the world’s digital economies, including Africa.
While dealmaking has shown several signs of slowing down, the cold impact of the funding winter is visible in the way African startups, like their overseas counterparts, are laying off staff. For the past few months, some of these companies have downsized their workforce, with a few taking valuation cuts.
To perhaps signal that the doubted downtrend is nigh, Kenya’s Sky.Garden—an eCommerce marketplace that helps vendors sells furniture, electronics, and other household items—is reportedly struggling to stay on its feet. The reason? The startup ran into some problems raising more venture funding and it became too expensive to run operations.
In 2021 (when the VC market was on a more upwards climb) Sky.Garden secured a Series A of USD 4 M from SANAD Fund for MSME, Aavishkaar, UNCOVERED FUND, and KSK Angel Fund.
Launched in May 2017, the company raised its seed round of USD 1.2 M from Norwegian and Danish investors. According to Crunchbase, Sky.Garden has raised a cumulative USD 6.1 M across 7 funding rounds, including grants and convertible notes.
While Sky.Garden’s management is in talks with potential investors to sidestep having to shut down, it appears it is embarking on a hiatus that would begin on October 6th. Employees have been notified of the cessation since early September.
A handful of African startup founders have voiced out the challenges that come with being around at a time when the market is imbalanced. Some have slightly tweaked their business models to weather the post-pandemic storm, occasioning a layoff season that might unseat the similar efforts of Andela from late 2019.
Interestingly, Kenya seems to be taking the lead; Kune, a foodtech basket with a somewhat shaky start, closed up shop in June due to the same problem: difficulty in raising funding. Meanwhile, Sendy and MarketForce have offloaded a fraction of their staff, while Egypt’s Swvl ditched the Kenyan market to focus on others.
In erstwhile African markets, startups like Egypt’s Veezeta, Brimore, Wave, Capiter, Elmenus, Trella, ExpandCart, and Edukoya have laid off employees, while names such as GetEquity and Quidax are taking the less punitive approach of slashing salaries.
Sky.Garden’s predicament is yet another proof that African eCommerce is a tricky industry.
Despite adapting the Amazon business model, the company appears to be unable to overcome the financial hurdles associated with the world’s eCommerce market. Given the uncertain times, it could be even harder to scale up eCommerce models not only in Africa but also across the world.
Featured Image courtesy Yujin Kim/Retail Dive