The Hits and Misses of Kenyan Startups: A Closer Look at the Challenges
Matching t-shirts and wide smiles are the hallmark of a typical Kenyan startup, symbolizing unity and the official “startup look.” Whenever you see this photo on LinkedIn, it’s almost a given that a local startup has raised funding. Kenyan startups are renowned globally for their innovation and boldness in exploring new frontiers.
In 2023, Kenyan startups raised a staggering USD 800 million, an amount significant enough to power a region in any part of Africa. This figure represents approximately 30% of Burundi’s GDP or 5.6% of Rwanda’s GDP in the same year. Many companies secure over a million dollars in funding at each stage. However, for many of these big hitters, these resources are merely a precursor to tougher times ahead. Despite attracting substantial investment, numerous companies end up failing. This article delves into some of the disappointing turn of events that have plagued Kenyan startups.
Twiga Foods
Twiga Foods raised USD 30 million in Series B funding in 2019 and USD 50 million in Series C funding in 2021. Despite this, the workforce was downsized and employee benefits reduced in November 2022. Ten months later, then-CEO Peter Njonjo defended the company after laying off 30% of its staff. This move was puzzling, given the substantial funds raised and the government’s support for Twiga Foods as a top Kenyan startup. The government had allocated 20,000 acres in the Galana Kulalu irrigation scheme for development by Twiga Foods.
However, CEO Peter Njonjo had transferred the land to his private company, Selu Limited. Despite earlier claims that the company belonged to a Latin American group, he was found to be the sole shareholder. This controversy led to former Jumia CEO, Charles Ballard taking up the mantle at Twiga.
Marketforce
Tesh Mbaabu and Mesongo Sibuti are household names in the Kenyan Tech industry. Even before fame, during their time in campus, they buzzed the streets of Nairobi with their innovative approach to tourism then called Cloud9 experiences. The duo also managed to feature in KCB’s Lion Den, a reality television series spinoff from Dragon’s Den. Years later the duo co-founded Marketforce, a company that wanted to digitize retail distribution in Africa.
In 2020 Y Combinator, on boarded the Kenyan startup to its accelerator program paired with a check of $150,000 USD. In 2022 the company raised $40 Million, the largest by any Kenyan company in a single round. It however became eminent that things were not going well when just over a year later. The company was back again seeking a meagre $1 million from crowdfunding. A couple of months later Pezesha Limited took Marketforce to court. Marketforce was apparently not paying their dues. The fight was amicably solved out of court after six months. The CEOs from the respective companies taking a selfie in the Masai Mara to crown the moment.
In the first quarter of 2024, Marketforce closed down office and the founders announced they would be channeling efforts to their newer startup, Chpter. According to several experts Marketforce was providing a solution to a problem that never really existed in the first place and the burning of cash through mismanagement did not help the situation.
Kune Foods
A young, swanky CEO, Robin Reecht, came from France and immediately immersed himself in the local Kenyan culture. He noticed how hard it was to find authentic home-cooked meals in Nairobi. A good majority of inhabitants would disagree. Robin then came up with Kune Foods, a company with a number of cloud kitchens that promised to be more affordable than the existing competition.
The idea of Kune Foods was plausible. Within six months of opening the business, they raised $1 million in pre-seed funding. At one point, it felt as if the whole of white-collar Nairobi was reliant on Kune Foods, with their delicious thick chapatis becoming the talk of the town.
Business was booming, and Kune made plans to acquire about 100 electric motorcycles to aid in food delivery. However, this is when the challenges began. Robin pitched the company to several investors for funding but to no avail. As abruptly as they entered the scene, they exited.
At 300 Ksh per meal on average, Kune’s food was not as cheap as the company made it seem. For the greater portion of city dwellers who earn that amount after a whole day’s work. Additionally, allegations surfaced about Robin gallivanting the country on the company’s budget. Kune Foods died a natural death that was forthcoming, as their business model seemed only to cater to the more affluent residents of Nairobi, locking out the rest.
Largely thanks to Mpesa, Kenya is considered the home of innovation in the southern world. For every startup that failed we have tens of thousands of Kenyans bringing to life unique ideas every day. This should therefor only be a challenge to other startups to learn from the mistakes of their predecessors and reach for the stars.