Nigeria’s Fledgling Startups Are Returning Capital And Calling It Quits

African startups are facing a period of reassessment and realignment as fledgling players announce their decisions to return remaining capital to investors and shut shop. These developments signal a broader trend in the continent’s tech ecosystem, where startups are finding it increasingly challenging to secure funding and find their feet in competitive markets.

Thepeer, a Nigeria-based API startup, embarked on a mission to revolutionize digital payments for businesses. However, despite raising a substantial USD 2.1 M seed round, the company faced insurmountable challenges related to compliance issues and slow adoption of digital wallets.

In a parting move announced in a public statement on Monday, Thepeer opted to return capital to investors and cease operations, acknowledging the need for a fundamental reevaluation of its approach after struggling to gain traction. Specifics of the amount returned to investors were not divulged.

Earlier this year, Cova, a Nigerian wealthtech startup founded with the vision of providing a “single source of truth” for asset management, shut down having faced hurdles in scaling its operations.

Despite early success and significant funding, the startup found itself unable to sustain operations amid tightening fundraising conditions and scaling problems. The decision to wind down operations and return leftover capital underscores the reality facing many startups in Africa’s rapidly evolving tech landscape.

These developments reflect a broader shift in the startup and venture capital ecosystems, both locally and globally. The once-burgeoning optimism surrounding Africa’s tech scene has given way to a more cautious and discerning approach among investors. Tightening liquidity, coupled with increased scrutiny on business fundamentals, has forced startups to reassess their strategies and focus on sustainable growth.

The challenges encountered by Thepeer and Cova are emblematic of the broader struggles faced by African startups in securing funding and gaining market traction. Despite significant advancements in recent years, the continent’s tech ecosystem is still maturing, with growing pains evident across various sectors.

In response to these challenges, startups are being forced to pivot, downsize, or, in some cases, shutter operations altogether as seen in several cases over the previous year.

Nigerian genomics firm 54gene, South African transit data provider WhereIsMyTransport, and Kenyan logistics platform Sendy are among the highest-profile African startups to shut down last year, and the closure of Ghanaian fintech Dash under scandalous circumstances was a notable low point. In all, fifteen or so African tech startups announced their closure in 2023, per a compilation by tech publication Afridigest — after raising over USD 200 M combined.

While these developments may seem discouraging, they also present opportunities for introspection and innovation within the ecosystem. By learning from the experiences of companies like Thepeer and Cova, entrepreneurs and investors can chart a course towards sustainable growth and long-term success in Africa’s dynamic tech ecosystem.

Featured Image Credits: Adewale Yusuf/Techpoint