At the end of the first six months of this year, VC funding in the African tech ecosystem declined 48% compared to the corresponding period last year.
"The key thing is that our biggest funding source—which was US investors—are significantly impacted," According to Peter Oriaifo, Principal at Oui Capital. "This has been the case for well over a year now, and logically speaking, how can we expect funding to recover or buck global trends when we are reliant on capital from the west? Its never made any sense."
As the economic downturn enters another year, the funding drought has forced some startups across the globe, including in Africa to either shut down, scale down operations or pivot.
In this article, we curated some of the startups that fall in the aforementioned categories, though there are some small startups that have possibly flown under the radar, we curated this list based on publicly announced closures in the media.
RIP: The Africa-focused startups that closed operations
In April, Nigerian crypto and web3 company, Lazerpay shut down its operations after its inability to raise additional funding. Prior to the closure the company laid off some of its employees last year after the proposed lead investor for its seed round withdrew its interest due to the "market conditions and disagreement on terms".
"Despite our team's tireless efforts to secure the necessary funding to keep Lazerpay going, we were unable to close a successful fundraising round," Njoku Emmanuel, founder and CEO of Lazerpay said in a statement seen by Bendada.com. "We fought hard to keep the lights on as long as possible, unfortunately, we are now at a point where we need to shut down."
Launched in 2021, Lazerpay worked like Stripe, but for crypto. Businesses used its channels to accept crypto payments from their customers: integrate a collections widget in their apps and collect payments through a link.
Just before Lazerpay's closure, Paxful, a global Bitcoin marketplace with strong presence in Africa—especially in Kenya and Nigeria, closed shop and returned funds to users due to mass staff exits and increasing regulatory issues, according to the then CEO, Ray Youssef.
Prior to the relaunch, Youssef announced that he is resigning from his role as Paxful's CEO. "This was done under the very worst of conditions with a cofounder suing me and the company, refusing to pay salaries, chasing away all top talent with a terror lawsuit and trying to get me in contempt of court," he tweeted.
Roshan Dharia has since been appointed as the interim chief executive at the company. Roshan was most recently a senior executive at TrustToken (now known as Archblock) where he led the DeFi institutional lending business—successfully deploying over $1.5 billion in stablecoin loans to crypto-native companies.
In March, Kenyan B2B e-commerce startup Zumi closed down after failing to secure the additional funding to continue operations. Launched in 2016, Zumi started as a female-focused digital magazine, before closing down and pivoting into e-commerce in 2020. The end-to-end marketplace connected retailers with suppliers and facilitated the entirety of a transaction between the two, including payments and logistics.
According to co-founder and CEO William McCarren, the startup achieved over $20 million in sales, acquired 5,000 customers and built a team of 150 people. “The current macro environment has made fundraising extremely difficult, and unfortunately, our business was not able to achieve sustainability in time to survive,” he said.
Nine months after it launched operations, Nigerian logistics startup, Hytch closed down its operations in February. "We couldn’t raise [funding] and couldn’t sustain the business with just the money we were making," says Laolu Onifade, Hytch's co-founder. Although the startup launched as a ride-hailing company, it pivoted to offer fulfillment serving Nigerian healthtech Famasi, Wicreate, and Smileys.
Last year, Hytch said it was in the process of raising its pre-seed and after raising a family-and-friends round. "We built the traction...and processed thousands of deliveries, but we couldn’t close out the round. In fact, we were already building something no one was doing, without any operational cost," Onifade told Bendada.com.
In Janaury, Coca-Cola-backed e-commerce startup Wabi shut down operations in five African markets, including Nigeria, Kenya, and Egypt. The company continues to operate in about 14 other countries across the globe.
Of scaling down operations and pivots
Pillow exited Nigeria
Barely a year after expanding to Nigeria, crypto startup Pillow exited the West African country citing "current regulatory climate and its impact on associated financial infrastructure".
Founded in 2021 by Arindam Roy, Rajath KM, and Kartik Mishra, Pillow is a community of more than 75,000 users in over 60 countries who are taking control of their financial lives by saving and investing using digital assets. Within the Pillow app, users can invest and save in US Dollar-backed stablecoins, as well as multiple blue-chip cryptocurrencies including Bitcoin, Ethereum and others.
Early 2022, Pillow grew its user base by 300%, with assets under management having grown 5x. In addition, the company expanded into Nigeria, Ghana, and Vietnam, among other emerging markets.
Transitions at Hover
Due to its inability to raise additional funding, Hover—the parent company of Stax, in April disclosed that instead of shutting down, it is transitioning from a "full-time team to an open source community". "We failed to achieve scalable economics and have not been able to raise additional capital. We must now take drastic measures to keep our vision and work alive," Ben Lyon, CEO at Hover, said in a statement seen by Bendada.com.
Prior to this investment, Stax raised $2.2 million in a seed extension round in the same year. Currently, Stax supports over 100 bank and mobile money services across sub-Saharan Africa and has been used by more than 250,000 people.
Copia switches focus
In April, B2C e-commerce company, Copia closed down its Ugandan operations due to the economic downturn. "This decision is consistent with many of the best companies in Africa and across the world, which are responding to the market environment and prioritizing profit," Tim Steel, CEO at Copia Global, said in a statement seen by Bendada.com.
However, the company said it will double down on its operations in Kenya.
Out of FTX crash, Nestcoin pivots
Nigeria-based Web3 and crypto-focused company, Nestcoin was impacted by the 2022 FTX crash losing a significant amount of its $6.45 million pre-seed, this led the company to downsize its workforce.
In a come back, Yele Bademosi, Nestcoin's co-founder and CEO disclosed in March that the company is pivoting to build Onboard, which he described as a "digital finance platform that prioritises community and is owned by its members".
Initially, Nestcoin was launched as an incubator; building and accelerating the growth of crypto products, it also invested in other Web3 companies, including defunct Lazerpay. With the pivot, one of its products, Metaverse Magna now operates as an independent company, meanwhile its media product Breach has now been rebranded to Compass by Onboard.
Oriaifo is not optimistic that funding across Africa will ramp up soon, in fact he predicts that valuations will continue to fall across Africa, as the capital pool becomes increasingly local. "As local funds come into the center stage, most of which are smaller compared to global capital, the valuations they can afford to pay are markedly lower than their global peers hence downward pressure on valuations," he says.
Some companies that are unable to raise additional funding for their operations might have to either layoff, shutdown or pivot like the aforementioned have done. According to Oriaifo, "the best cure is efficient operations".
He also argues that outside equity, there isn't really an alternative funding options that African tech entrepreneurs can explore: "Debt was there, but this debt is increasingly becoming more expensive in terms of interest rate, and the revenue you would once use to service it is increasingly harder to maintain due to currency devaluation and inflations effect on demand overall," he added.