The nascent startup ecosystem in Kenya is embattled. In a space of four months before October this year, about six funded startups have, in full or in part, bitten the dust, vanishing as though they never existed. In late June this year, Kune Foods with headquarters of operations in Nairobi, announced bitterly that after close to a year in operation and failing to secure new investors’ funding, it had chosen the difficult path of infamy — that of liquidation. Founder and Frenchman Robin Reecht called this a failed vision, “for which I will never forgive myself.” 

But it was as though Kune Foods was only starting a series of what would later zigzag into uncertainty and assume a new normal. A few months after it shut down, other fellow country startups such as Notify Logistics, WeFarm, BRCK, Sendy and Sky-Garden felt empowered to piggyback on the legacy left behind by Kune, including reinstating that Kune Foods’ famous mantra “current economic downturn and investment markets tightening up”. 

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Below is a comparative analysis of shutdowns or downsizing across 4 key African startup markets (Nigeria, South Africa, Kenya, Egypt) between January 2022 to October 2022. 

Nigeria

S/N	Name of Startup	Nature of Affected Operations	Founders And Their Nationality	Total Funding Amount Raised	Reasons for shutdown
1	Kloud Commerce	Total Shutdown	Olumide Olusanya (Nigeria)	$765K	Mismanagement and misuse of funds.
2	Kuda	Staff Downsizing	Babs Ogundeyi and Musty Mustapha (Nigeria)	$91.6M	Cost reduction
3	54gene	Staff Downsizing (including exit of both co-founders who double as CEO and VP, Engineering respectively)	Dr. Abasi Ene-Obong and Ogochukwu Osifo (Nigeria)	$94.7M	Cost reduction
4	Alerzo	Staff downsizing	Adewale Opaleye (Nigeria)	$16M	Cost reduction
5	Edukoya	Staff downsizing	Honey Ogundeyi (Nigeria)	$3.5M	Proposed pivot

Kenya

S/N	Name of Startup	Nature of Affected Operations	Founders And Their Nationality	Total Funding Amount Raised	Reasons for shutdown
1	Kune Foods	Total shutdown	Robin Reecht (French)	$1M	Failure to raise funding; high operational costs.
2	Notify Logistics	Total shutdown	Waweru Nderitu and Hellen Waweru (Kenyans)	$370.7K	Inability to break even due to high operational costs
3	WeFarm Shop	Total shutdown	Kenny Ewan and Claire Rhodes (UK)	$1.6M	Inability to scale
4	BRCK	Total shutdown	Erik Hersman, Jon Shuler, Philip Walton, Reg Orton (US)	$4.2M	No reasons adduced but COVID-19 largely blamed.
5	Sky-Garden	Total shutdown	Martin Majlund (Denmark)	$6.1M	Ran out of cash.
6	Sendy	Staff downsizing	Evanson Biwott and Don Okoth (Kenya) and Malaika Judd. T (US)	$26.5M	Economic difficulties.
7	MarketForce	Staff downsizing	Tesh Mbaabu and Mesongo Sibuti (Kenya)	$42.9M	Redundancy.

South Africa

S/N	Name of Startup	Nature of Affected Operations	Founders And Their Nationality	Total Funding Amount Raised	Reasons for shutdown
1	Snapt	Total shutdown	Dave Blakey (South Africa)	$7.7M	Difficulty raising funds.
2	NextNow	Total Shutdown	Lindelwa Ntombela (South Africa)	Undisclosed	Stiff competition led by industry leaders Uber and Bolt adduced as reasons.

Egypt

S/N	Name of Startup	Nature of Affected Operations	Founders And Their Nationality	Total Funding Amount Raised	Reasons for shutdown
1	Capiter	Total shutdown	Mahmoud Nouh and Ahmed Nouh (Egypt)	$33M	Economic difficulties. Dispute between board and founders.
2	Vezeeta	Staff downsizing	Amir Barsoum, Ahmed Badr (Egypt)	≈$90M	No reasons adduced.
3	SWVL	Staff downsizing	Mostafa Kandil, Mahmoud Nouh and Ahmed Sabbah  (Egypt)	$264M	To focus on its highest profitability operations, enhance efficiency and reduce central costs
4	Elmenus	Staff downsizing	Amir Allam (Egypt)	$19.6M	Cost reduction
5	Trella	Staff downsizing	Omar Hagrass (Egypt)	$41.7M	Cost reduction
6	ExpandCart	Staff downsizing	Amr Shawqy and Sameh Nabil (Egypt)	$5.4M	Cost reduction
7	Brimore	Staff downsizing	Mohamed Abdulaziz and Ahmed Sheikha (Egypt)	$56.5M	Cost reduction and boost profit.

High Operational Costs Mostly Responsible For Woes Of Embattled Startups

While it may appear that startups in Africa are raking in money by way of investment, the money seems to be disappearing almost as rapidly as it comes in. Consider the case of Kune Foods which raised $1M in venture capital only to close one year after. Although Kune Foods’ CEO Robbin Reecht partly blamed tough funding market, coupled with rising food costs which deteriorated the startup’s margins especially as it strove to keep its food prices low, the heavy investment the startup made in research and development was largely responsible for its demise.

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This is the same story for the Nasdaq-listed Egyptian mobility tech firm SWVL, which in May year this announced it had laid off 32% of its entire workforce. Although the company stated that the downsizing was made so the company could be cash-flow positive in 2023, it is common knowledge that the transport company has been hemorrhaging cash in recent times.  

“We believe this is a Crucible Moment,” advises Sequoia Capital, the iconic venture firm known for early bets on Google, Apple and WhatsApp, last month in a 52-page presentation titled “Adapting to Endure.” “First and foremost, we must recognize the changing environment and shift our mindset to respond with intention rather than regret.”

“We do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery like we saw at the outset of the pandemic….Companies who move the quickest have the most runway and are most likely to avoid the death spiral. Look at this as a time of incredible opportunity. You play your cards right and you will come out as a strong entity,” the presentation further reads.

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. 
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh