The narrative of failed startups in Africa in 2023 provides crucial insights into the challenges and realities of the startup landscape on the continent. Despite the surge of interest and investment in African startups, this year marks a significant downturn, with several promising startups closing their doors.
Funding difficulties, operational sustainability, and market dynamics were the nails that sealed the coffin for promising startups like Nigerian genomics firm 54Gene, Kenyan logistics company Sendy, South African transport data company WhereIsMyTransport, and Ghanaian fintech Dash.
Once celebrated for their innovative approaches and potential to revolutionise their respective sectors, these startups have collectively raised over $180 million yet faced an untimely demise.
Ghanaian fintech Dash, once a symbol of innovation in African cross-border payments, is now a case study among failed startups in Africa. Launching in 2019 to connect mobile money wallets and bank accounts across Africa, Dash secured $86.1 million in Funding.
Dash raised an impressive $86.1 million, including a record $32.8 million seed round in 2021. However, the company’s trajectory took a nosedive amid allegations of misrepresenting user metrics and financial mismanagement by its founder, Prince Boakye Boampong. These accusations, compounded by a high burn rate and expansion into multiple countries, led to a financial shortfall and the eventual shutdown of the startup in October 2023.
Sendy was a Kenyan logistics startup with immense potential but succumbed to market and operational pressures. Established in 2015, Sendy aimed to revolutionise how African retailers connect with manufacturers.
The company faced severe financial constraints despite raising $26.5 million and achieving a valuation of over $80 million. Efforts to secure $100 million in Funding fell short, leading to workforce reductions and the scaling back of operations. With investors pulling back and operational costs mounting, Sendy’s journey ended in August 2023, highlighting the fragility of startup sustainability in challenging economic climates.
54gene, a Nigerian genomics startup, set out on a mission to put African genomics on the global map but ended up on the list of failed startups in Africa in 2023. Raising $45 million across three Funding rounds, the company sought to bridge the gap in genetic material used for global pharmaceutical research. However, internal turmoil, frequent leadership changes, and legal challenges overshadowed its scientific aspirations. The company’s financial struggles became apparent with the winding down of operations in July 2023, leading to its closure in October. This underscores the complexities faced by African startups in maintaining momentum and operational stability.
WhereIsMyTransport, a South African startup founded in 2016, had a unique mission: mapping formal and informal public transport networks to improve commuting experiences. The startup faced a critical Funding shortfall after raising over $27 million and gaining significant traction. Despite its innovative approach and partnerships with entities like the World Bank, the startup’s inability to secure new investments led to its closure. This case exemplifies the challenges startups face in scaling and maintaining momentum in the long term, especially in specialised sectors like mobility data.
What we can learn from the failed African startups
1. Financial Prudence and Transparency
Mismanagement of funds and lack of transparency, as seen in Dash, can lead to catastrophic outcomes.
Actionable Tip: Implement rigorous financial management practices. Regular audits and transparent reporting can help maintain investor trust and ensure financial health.
Realistic Growth and Scaling Strategies:
2. Over-ambitious expansion
As evidenced by Sendy’s experience, this can strain resources and lead to failure.
Actionable Tip: Scale your business methodically. Prioritize sustainable growth over rapid expansion. Assess market demand and operational capabilities before entering new markets.
3. Robust Leadership and Governance
Frequent leadership changes and internal disputes, as in the case of 54gene, it can derail a startup’s focus and operations.
Actionable Tip: Establish a robust and stable leadership team. Foster a culture of collaboration and ensure that leadership transitions are smooth and well-planned.
4. Adaptability to Market Changes:
The inability to adapt to Funding challenges and market shifts, as seen with WhereIsMyTransport, can lead to a startup’s downfall.
Actionable Tip: Remain flexible and responsive to market trends and challenges. Develop a business model that can withstand economic fluctuations and shifts in investor sentiment.
5. Sustainable Business Model and Revenue Streams
Dependence on continuous external Funding without a clear path to profitability can lead to vulnerability.
Actionable Tip: Focus on building a sustainable business model. Diversify revenue streams and work towards self-sustainability to reduce reliance on external Funding.
The collapse of these four startups serves as a critical lesson in the African startup ecosystem. It underscores the importance of financial prudence, realistic growth planning, and sustainable business practices. As the environment for startups in Africa evolves, understanding and learning from these failures is vital for future success. The narrative of failed startups in Africa isn’t just about loss; it’s about lessons learned and paving the way for more robust, resilient entrepreneurial ventures.
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