Inside the failed Y Combinator-backed startups in Africa

Johnstone Kpilaakaa -

Over 400 of Y Combinator's backed startups are officially inactive. Among them, Bendada.com's analysis of the YC Directory found that five are African startups. As tech reporter Kyril Kotashev observes, "The truth is that a significant number of startups fail even if they benefit from the best possible conditions in the world."

The shutdowns of these startups stem from various factors, including internal conflicts, financial misappropriation, and challenging economic climates.

Y Combinator's highly selective accelerator programs, with an acceptance rate of around 1.5% to 2%, have invested in roughly 4,597 startups since 2005, with approximately 106 focusing on the African market, according to its directory.

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Fun Fact: Wave, from Senegal, became the first Y Combinator-backed African startup in 2012. Meanwhile, Paystack was the first Nigerian startup to be funded by the accelerator, not PetaSales.

Let's take a closer look at five African startups backed by Y Combinator that have closed their doors since the accelerator's first investment on the continent in 2012.

Pivo

  • Launched: 2021
  • Sector: Fintech
  • Primary market: Nigeria
  • Founders: Nkiru Amadi-Emina (CEO) and Ijeoma Akwiwu (COO)
  • Total funding raised: $2.8 million
  • YC batch: S22
  • Shutdown: December 2023

Once part of Y Combinator's 2022 summer cohort, Pivo was a Nigerian digital bank aiming to serve the trade sector in Africa. In December 2023, the startup closed shop due to unresolved founder conflict, according to sources familiar with the matter. The reported conflict between Amadi-Emina and Akwiwu allegedly eroded Pivo's reputation, damaged business relationships, fractured company culture, and disrupted team dynamics. These consequences significantly hampered the startup's ability to secure future funding.

The shutdown happened a year after Pivo announced a $2 million seed round. Nkiru and Ijeoma bootstrapped Pivo for about six months before it became venture funding. Aside from YC, the Nigerian fintech was backed by Precursor Ventures, Vested World, FoundersX and Mercy Corp Ventures.

54gene

  • Launched: 2019
  • Sector: Biotech
  • Primary market: Nigeria
  • Founders: Abasi Ene-Obong
  • Total funding raised: $94.7 million
  • YC batch: W19
  • Shutdown: September 2023

Last year, Nigerian genomics startup 54gene faced a storm of controversy, including lawsuits, fraud allegations and valuation cuts, ultimately leading to the company's shutdown.

Before its closure, 54gene faced internal turmoil. Co-founder and CEO Abasi Ene-Obong resigned, and his successor, Teresia Bost, the general counsel, later filed a lawsuit against the company alleging discriminatory behaviour and a hostile work environment. She named Ron Chiarello, her successor as CEO, as one of the defendants. Chiarello also left the company earlier this year.

"The company could not continue to operate financially, and it began to wind down in July," Chiarello said. 54gene was previously named as one of Y Combinator's 2023 top companies.

Related Article: Ex-CEO of 54gene launches Syndicate Bio, another genomics startup

Passerine Aircraft

  • Launched: 2017
  • Sector: Aviation
  • Primary market: South Africa
  • Founders: Matthew Whalley
  • Total funding raised: $120,000
  • YC batch: S17
  • Shutdown: March 2020

Driven by the vision of runway-free takeoff, Whalley founded Passerine Aircraft, developing electric-powered delivery drones that utilised a novel jumping mechanism to achieve flight.

While the specific reasons for Passerine Aircraft's closure haven't been made public, the hardware-intensive nature of its electric drones likely contributed. As a capital-intensive industry, hardware development often requires significant funding beyond the initial $120,000 Y Combinator investment, which might have posed challenges for the startup.

Tress

  • Launched: 2014
  • Sector: Social commerce
  • Primary market: Ghana
  • Founders: Priscilla Hazel, Esther Olatunde, and Cassandra Sarfo
  • Total funding raised: $120,000
  • YC batch: W17
  • Shutdown: May 2018

Years ago, three female tech entreprenuers met at Meltwater Entrepreneurial School of Technology and collaborated to develop a social community app.

Tress aimed to empower women in their hairstyling journey. The platform served as a discovery tool, showcasing trendy styles with details on used products, stylists' information, and pricing. Users could also share their personal favourites, exchange tips and techniques, and find support within a positive community.

Tress, a Ghanaian startup aiming to capture a share of the then $500 billion global haircare market, secured a spot in Y Combinator's 2017 accelerator programme.

Despite generating significant online buzz, Tress ceased online activity in May 2018; The website and mobile app were not available. The co-founders also transitioned to other roles at that time.

Saida

  • Launched: 2015
  • Sector: Fintech
  • Primary market: Kenya
  • Founders: Kyale Mwendwa and Kenneth Ngetha
  • Total funding raised: $120,000
  • YC batch: S15
  • Shutdown: January 2022

When it launched in 2015, Saida, a Kenyan fintech startup, aimed to empower users by enabling them to manage their finances through separation, spending and tracking, as well as access to short-term loans based on mobile phone activity data.

While the specific reasons behind Saida's shutdown remain unclear, co-founder Ngetha has since transitioned to venture-building engagement at Catalyst Fund.

While a few Y Combinator-backed African startups have unfortunately shut down, others like Paystack (W16), Oolu (S15), and Crowdforce (W20) have found success through acquisitions. With several others driving innovation on the continent.