The Most Controversial African Startup Failures/Closures Of The Decade

Things happen, startups fail, life goes on. That may come across as cliche and perhaps a tad cavalier, but that’s pretty much the way things turn out sometimes.

Well, nobody ever sets out to build something that would ultimately flop but the harsh reality is that, more often than not, startups do fail. As a matter of fact, startups are more likely to fail than they are to succeed. At least, that’s what is implied when the statistic that says “about 90 percent of all startups fail” comes to mind.

And in a startup ecosystem like Africa’s, where pro-startup resources can be hard to come by, failures are even more common.

Over the course of the last 10 years, the tech/startup ecosystem in Africa has gone from virtually non-existent to remarkably budding.

Record funding amounts have been raised year-on-year, Silicon Valley venture capital has arrived, some countries have enacted Startup Acts, tech innovation hubs have sprung up from everywhere, and so have incubators, accelerators, and ideations.

Undoubtedly, the African startup ecosystem has witnessed great progress over the course of the past decade. But it would be naive to think that things have been generally rosy for startups in the ecosystem. 

For every Flutterwave that went from zero to a hundred in a flash, there’s a DealDey that didn’t quite cut it until it was eventually chewed up and spat out by the ecosystem. Yes, it’s kind of a mixed bag, there are just as many strawberries as there are rutabagas. 

And now we try to pick out the rutabagas. Here’s a look at some of the high-profile African startups that closed shop in this decade.

DealDey (Nigeria, 2011-2019)

The announcement of the closure of DealDey was made in January this year. The startup was founded as a daily deals platform by Sim Shagaya, the Nigerian serial entrepreneur who recently raised USD 3.1 Mn for his current edtech venture, uLesson.

As of 2015, DealDey was in league with the biggest e-commerce players in Nigeria and the startup even managed to gobble up a USD 5 Mn investment from Kinnevik. But it didn’t take long before things started to go downhill.

A combination of factors including market uncertainties and the apathy surrounding Nigerian e-commerce at the time resulted in a cash purge that forced the company to lay off 60 percent of its staff towards the end of 2015. 

Early the following year, it was reported that DealDey had been acquired for USD 5 Mn by Ringier Africa. But there was to be no salvation as the company appeared to have gone beyond redemption at that point.

With the likes of better-funded though struggling competitors like Jumia and Konga breathing down its neck, DealDey huffed and puffed until January 2019 when it closed shop.

Efritin (Nigeria, 2015-2017)

Efritin suspended operations in 2017 amidst complaints of poor internet penetration and adoption, high cost of data, and the challenging prevailing economic headwinds in Nigeria, as factors that forced its demise.

The startup came to life in 2015 as an e-commerce platform for used goods with the backing of the Swedish company, Saltside Technologies.

Nils Hammer, CEO of Efritin’s parent company, was in charge of the startup for most of its time in Nigeria and it was he who listed all the factors above as reasons the startup couldn’t hold its own.

But there was another interesting take on the matter from a from an insider — Uche Ajene, a former marketing manager at Efritin — who blamed the company’s demise on the Somalian national who formerly managed Efritin.

That manager was Zakaria Hersi and Ajene accused him of stealing thousands of dollars, enabling internal mismanagement and creating false invoice trails to cover his tracks.

OyaPay (Nigeria, 2017-2019)

OyaPay started on a promising note in 2017 as a Nigerian fin-tech platform for offline businesses to accept payments and take forward orders from their customers with or without a smartphone. The startup was established by a trio of co-founders with Abdulhamid Hassan serving as CEO. 

After initially hitting the ground running, the startup reached an abrupt end in February 2019 and the reason for the closure was kind of unusual.

According to Hassan, OyaPay had to close shop due to what appears to be a family squabble.

It turned out that Hassan had taken a small seed round from an uncle of his who wouldn’t budge when the need to dilute the investment arose. 

OyaPay had reached product-market fit and there was a need for further investment but the family member whose money he had taken to finance the company at the seed stage didn’t agree to dilute his investment. The matter dragged on for months until the startup eventually shut down.

CakeTunes (Sept. 2017 – Jan. 2019)

An online marketplace where music producers can sell beats to musicians and video firms. Founder and CEO, Ability Elijah, in giving reason why they had to shut down, said there was no profit or tangible revenue in sight. They opted for another capital to scale and hopefully make money, but that didn't work out as well. He tried the audio ad model but it didn’t pan out.

  • Sponsored music — No one wanted to sponsor their music on the platform. They preferred having their songs on Notjustok or Naijaloaded.
  • Advert model — No one wanted to run an ad on a platform that was solely doing a little over 100k monthly streams when they could get spaces to reach over 2 billion users on Facebook
  • Numbers of beats sold — They spent too much-targeting people outside Africa which proved too costly.
They ran ads in Nigeria but sold nothing as all sales seemed to be happening around France, London, Texas, Miami, Jamaica and luckily Capetown. So this was pretty much where they sold.

They later discovered that hundreds of sites and blogs were offering quality beats for free. Most of these were even as good as the beats we sold for $100.

Afrostream (Cameroon, 2014-2017)

Afrostream kicked off in 2014 as a subscription video-on-demand startup that was big on Afro-American and African movies. Tonje Bakang, the Cameroonian entrepreneur who founded the startup, may have been looking to pull off a Jason Njoku, but it appears that they didn’t quite pan out.

Barely two years after launching, the Y Combinator-backed startup which had also raised funding from five other investors, had to call it quits.

In a post put together by the startup’s founder, it was revealed that Afrostream was cut short because the startup couldn’t afford to raise further funding to raise funding to finance the content acquisition.

Bakang also revealed that he had made efforts to find buyers for the startup but that too proved futile. As things turned out, Bakang had to pull the plug on the startup having failed to mount a serious challenge as a competitor to Jason Njoku’s iROKO.

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