No one starts something expecting to fail. Yet, when it comes to startups, that is what everyone should anticipate. Studies have shown that at least 90% of all startups fail [PDF] that is why ‘fail fast, fail often’ or 'fail fast, fail cheap' is a highly significant area of the agile philosophy. History suggests that one should not be surprised when a startup announces that it is closing its doors, yet we are always surprised.
Based on Digest Africa research, we have looked up what we consider the most significant startup failures across Africa. In doing this research we point out some of the startups that had become high profile - by raising significant funding, assembling a stellar founding team, were described by the media as the next big thing or had attained some level of market traction - but found themselves on a downward spiral a few years down the road.
On average, it took each of these startups 4 years from its founding date to fail. Mxit - which was founded in 2004 and died in 2015, took the longest time while Egypt’s ridesharing startup Ousta, which was founded in 2016 and died in 2017, was the youngest. Some of the key reasons that the startups cited for failure included the inability to raise follow-on funding as well as stiff competition from better-financed rivals.
We hope the failures help others learn, grow and succeed!
1. Wabona (2012 - 2015)
Wabona was one of the many startups that were looking to make video-on-demand a big industry across Africa. The startup was founded by two South Africans - Simbarashe Mabasha and Simukayi Mukuna - in 2012. However, in August 2015, the startup shutdown after it failed to raise follow-on funding as well as the “uncertainty in the African video-on-demand (VoD) space”. Wabona failed to find a sustainable business model according to one of its co-founders: “African VoD services are still struggling to find the best business model, and there is a platform bubble. In this kind of operating environment, it became tough for us to get long term funding,” Mabasha noted. At the time of its closure, it had raised funding from the now-defunct 88mph.ac as well as CRE Venture Capital - one of Africa’s most prominent VC firms which led Andela’s US $40 million Series C.
2. Mxit (2004 - 2015)
In 2013, chat app Mxit a South African social networking platform reported that its monthly active user base was 7.5 million – but this figure dropped to just 1.2 million monthly active users in July 2015. In October 2015, Mxit announced that it was finally shutting down its corporate operations but would still leave the app available for download and use. Yet, a year later in October 2016, the app users couldn't send and receive messages anymore. The startup was founded in 2004. Mxit rode the instant messaging wave before the likes of BlackBerry Messenger and WhatsApp took off with the advent of smartphones and was a popular app of choice among South African teens and twenty-somethings when it entered the pre-smartphone era in 2005. In 2012, it acquired Motribe - a platform that allowed anyone, anywhere to build, manage and generate revenue from their own social mobile website. However, it fell victim to the rise of intense competition from international offerings such as WhatsApp and Facebook.
3. Ousta (2016 - 2017)
Egyptian ride-hailing startup Ousta shut down last year after it faced tremendous competition from global ride-hailing pioneer Uber and regional super-power Careem. In December 2016, both Carem and Ousta filed complaints [Arabic] with the Egyptian Competition Authority against competitor Uber for “flooding the local market”. The startups filed a complaint after Uber decided to not raise fares and forgo the 20% service fee it charges drivers until the end of January 2017. At the time of shut down, the startup - founded in 2016 - had raised at least $1.6 million in total funding from angel investors Omar Salah and Nader El -Batrawi.
4. Afrostream (2014 - 2017)
In September 2017, Tonjé BAKANG - the founder and CEO of Afrostream, a subscription video-on-demand startup that carried Afro-American and African movies, announced [French] that they were shutting down the venture. At the time of making the decision, Afrosteam had taken part in the prestigious Y Combinator accelerator program and had gone ahead to raise an undisclosed amount of funding from Orange Digital Ventures and four other investors. According to Tonje, Afrostream failed because they couldn’t afford to raise further funding to finance the content acquisition. His efforts to find a potential buyer for the startup also failed, which led to their final demise. “Between April and August 2017, I start[ed] discussions with more than 10 potential buyers, I move[d] to Los Angeles, Miami and New York to convince them to move quickly because I know [sic] that our cash would not allow us to pass the summer,” wrote Tonje.
5. DealDey (2011 - 2018)
Founded by Konga founder Sim Shagaya in 2011, DealDey was a Nigerian daily deals platform that officially shut down its operations towards the end of 2018. By 2015, DealDey was among Nigeria’s biggest eCommerce platforms, attracting a $5 million investment from Kinnevik. Things, however, took a turn for the worse shortly after, leading the company to lay off 60% of its workforce towards the end of 2015. In April 2016, it was reported that the company was acquired by Ringier Africa for US $5 million. It is reported that DealDey’s eventual death came from the stiff competition that Jumia and Konga - who were more capitalised - exerted onto it.
6. OyaPay (2017 - 2019)
This is a case of a startup that failed before it even got to see the real light of the day. OyaPay was a Nigerian fintech that was billed to be among the most promising yet found itself struggling and finally shutting down in February 2019. Founded by a team of three co-founders led by Abdulhamid Hassan as the CEO, OyaPay’s sudden death is attributed to a family investment gone wrong. According to Hassan, he had earlier taken a “small seed round from a senior family member (an uncle)”, and at the point of product market fit where the need for investors kicked in, the said family member pushed back on the idea of diluting his investment. “For months we couldn’t resolve it, I became frustrated and decided to call it quits,” he told Techpoint. Initial reports had indicated that Paystack had acquired the startup which the former denied. However, Hassan later joined Paystack, where he currently is working as the Product Manager.
7. GoMyWay (2015 - 2017)
GoMyWay was a Nigerian ridesharing platform which shut down its operations at the end of October 2017. The startup cited running out of funding as the reason for shutting down. GoMyWay’s then CEO Damilola Teidi pointed out that the startup couldn’t afford to go forward according to the initial plan of running a free service for a year or two. “It does take a lot of resources to run this business, and the initial plan was no longer sustainable. The shareholders/investors came to a conclusion to shut down operations and close the business as there were no funds to invest further,” Damilola noted at the time. At the point of closure, GoMyWay had received backing from several well-known investors, including Konga’s founder and former CEO Sim Shagaya and former Amazon and Naspers executive Bill Paladino. Damilola later joined Nigeria’s CcHub as the Director of Incubation after GoMyWay folded.
8. Efritin (2015 - 2017)
In January 2017, it was reported that Nigerian e-commerce site for used goods Efritin had shut down its operations and retrenched all its employees in Nigeria – a team of around 50 people. At the time of closing operations, Efritin was owned by Swedish company Saltside Technologies. Nils Hammer, the CEO of Saltside Technologies, cited poor internet penetration and adoption, high cost of data, as well as the challenging economic conditions as major reasons for the startup’s failure. Founded in 2015, Efritin’s former marketing manager Uche Ajene had earlier on accused Somalian national and former MD of Efritin.com, Zakaria Hersi of stealing thousands of dollars, turning a blind eye to internal mismanagement and false fully creating invoice trails.
9. Bkam (2012 - 2016)
By the time of its shutting down, Bkam had raised at least US $500,000 in total funding. Founded in October 2012, Alexandria-based Bkam was one of the first price comparison websites of the region. It was started by Egyptian entrepreneur Mahmoud Abdel-Fattah who was previously working with a local web development agency. After receiving initial investment from an Egyptian entrepreneur and angel investor Osman Ahmed Osman, Bkam went on to raise more from Jabbar Internet Group to expand into Saudi & UAE. Around the same time, some new players entered this space, including Egypt’s Yaoota and Dubai-based Pricena, both of which are still operational. In February 2016, Bkam ran out of funds and decided to shut down its operations. The founder afterwards worked for Careem as a Product Manager for a little over two years and currently leads technology and product at TaskSpotting, a Dubai-based micro-influencer marketing platform for branded content. According to Mahmoud, the startup failed because they couldn’t raise additional investment. “An investor promised $500k, and kept asking for documents for almost 4 months, while we stopped fundraising from other investors,” he told MENAbytes. “During those 4 months, I spent the company’s money and my personal money. Then he disappeared. E-Commerce in Egypt was collapsing, so it was hard to recover quickly.”
10. Tress (2016 - 2018)
The Ghanaian beauty startup was among the first startups from across Africa to get accepted into Y Combinator. However, Tress’ website is no longer available, and it last updated its social media over a year ago, though one of the Co-founders - Priscilla Hazel - still indicates Tress as her current workplace on her LinkedIn. Repeated emails to her company email address to clarify whether they were still in operation or not went unanswered. According to Tress’ Crunchbase profile, they had raised at least US $120,000 in funding.
11. Podozi (2014 - 2018)
Podozi is in the same boat as Tress. In January 2016, the beauty startup which helped one find the "right fit" beauty products for people of colour announced that it had received $100,000 in a convertible note from 500 Startups. A few months’ before - in October 2015 - the startup had also locked in US $20,000 in angel investment. However, its website has since gone down, and the beauty startup last updated its Twitter in May 2016, Facebook in March 2018 and Instagram in December 2018. Both Co-founders - Teniola Adejuwon and Wale Babatunde - still state the startup they founded in 2014 as their current and latest place of work on LinkedIn.
12. Nefsak (2008 - 2016)
In June 2011, Ideavelopers announced that it had made an EGP 10 million ( ~ US $600,000) investment into Egyptian e-commerce startup Nefsak. At the time of the investment, Ideavelopers described Nefsak as the “fastest growing Egyptian online retailer with sales increasing at five times year over year” with an “online catalogue has over 18,000 products covering a wide range of categories from computers and electronics to home decoration and fashion”. There are clear dates of when the startup ceased operations apart from the fact that their website no longer exists. Additionally, Nefsak last updated their Facebook page of more than 1 million followers in September 2016 while their Twitter was last updated on November 2014. Founded in 2008 by Sherif Nassar, Nefsak was among the pioneers of e-commerce in Egypt at that time. Before founding Nefsak, Nassar had worked with 3M, IBM Middle East as well as Lenovo Egypt.
13. ConnectMed (2016 - 2019)
Kenyan healthcare startup ConnectMed is among the latest to shut down across the African continent. In the March 2019 press release that indicated the startup’s shutting down of its operations, Melissa McCoy pointed out that Merck was taking over ConnectMed’s intellectual property including their telehealth solutions. After the handover, Melissa added that “ConnectMed will cease operations”. Over its lifetime, the startup which was founded in 2016, launched three direct-to-consumer digital health products in Kenya and South Africa and served over 8,000 patients, along with corporate clients. It raised over US $300,000 in investment through grants and prizes mainly from the University of Cape Town’s Bertha Centre, University of Oxford’s Skoll Centre, Entrepreneur First and Katapult Accelerator.to
14. Showroom.ng (2014 - 2016)
In an August 2016 Medium blog post, Showroom.ng founder and then CEO Sheriff Shittu announced that he had decided to shut down the startup after 2 years of operation. Sheriff cited a couple of reasons for the startup’s failure summing them up into wrong execution. “I personally won’t attribute the failure to [the] wrong market or wrong product. It was a wrong execution,” he noted. Sheriff Shittu began the furniture marketplace earlier in 2015. Before Showroom, he was a business analyst at Konga for 18 months. He later became the COO of Zima Fashion, a fashion e-commerce store where he continued to function in an advisory capacity after leaving to start Showrooom.ng. In 2015, it was reported that the startup - a Nigerian marketplace for furniture - had raised an undisclosed amount of seed funding from local investors.
15. Nezal (2010 - 2016)
Like Nefsak, Nezal was also a portfolio company of Ideavelopers. The startup had set out to make to turn social revolutions in the Middle East and North Africa into games and raised $1 million in Series A investment that was led by Ideavelopers in October 2011. However, the startup’s founder and former CEO, Muhammad Ali, has since moved on to become a product manager at Google. According to Ali’s LinkedIn profile, he indicates that his timeline with the startup he founded in July 2010 ended in April 2016.
16. Naspers’ e-commerce ventures (2009 - 2014)
Africa’s most valuable company by market cap was among the first investors that looked to ride the e-commerce wave across the continent. However, in 2014 the company announced that it was shutting down some of its e-commerce investments in South Africa that were owned through the African division of MIH, the offshore investment arm/holding company of the Naspers Group. The shutdowns focused on a number of its smaller ecommerce properties, including online fashion outlet Style 36, digital camera store SAcamera and baby product outfit Kinderelo as well as furniture site 5Rooms. At the time, Naspers’ spokesperson maintained that they carried out the shutdowns to shift their focus to the more general e-commerce site Kalahari.com, which was founded in 1998. However, the site was later merged with Takealot.com in early 2015. Naspers had established the ventures through AIA accelerator in which it invested through MIH.
- written with support from Kenneth Legesi, Head of Research. Email [email protected] in case of any comments.