At least six Kenya-based start-ups closed shop this year due to a number of threats, including lack of financing, pandemic woes, and a tough economic environment.
Most were tech companies, hurting the country’s vision of Silicon Savanah of Africa, a version of America’s Silicon Valley that has given birth to such tech giants as Facebook, Twitter and Uber.
These closures led to massive job losses, reversing some of the gains the country had made after it rolled back the painful Covid-19 disruptions and containment measures.
However, this year, as liquidity in the global financial markets tightened due to increase of interest rates in developed economies, especially the United States, more capital flowed out of emerging and frontier economies like Kenya than it came in.
With investors suddenly wary of high risk frontier economies, funding for some start-ups dried up.
That was the fate of food tech venture Kune Foods. Kune, founded by Frenchman Robin Reecht, was among the first start-ups to close down in June, leaving more than 90 employees without jobs.
It bowed out after failure to raise Sh30 million in investor funds at the height of rising operational costs.
“With the current economic downturn and investment markets tightening up, we were unable to raise our next round,” Mr Reecht had said in a statement.
Kune also revealed that it had failed to raise finances from investors to boost its operations, signifying a tendency by venture capitalists especially from the developed world to push forth investments due to fears of recession and interest hikes.
Sendy also announed the closure of its retail and supplier platform known as Sendy Supply in a move that saw 20 percent of its workforce axed.
The firm attributed the move to a funding drought, blaming developed economies for raising the cost of lending.
Some of the failures, analysts said, could be attributed to the failure of the entrepreneurs to understand the uniqueness of the Kenyan market.
Anza Now CEO Bobby Gadhia, whose firm PC World Limited collapsed in 2016, said “the tech sector is one of the most stressful and demanding that one can ever venture into”. Among other qualities, those who manage to navigate it and succeed need “balls of steel”.
Electric vehicle (EV) taxi brand Nopea, Kune Foods, Notify Logistics, Sky Garden and We Farm are just a few of the start-ups that exited, either partly or in full, after they failed to survive despite their rosy start and promising outlook.
Generally, an imminent global recession, characterised by a spike in consmer prices, or what is technically known as stagflation, has negatively impacted start-ups.
In November, Nopea permanently exited the Kenyan market after its majority shareholder and financier EkoRent Oy declared insolvency in Finland.
Earlier, other start-ups such as BRCK, which was providing free WiFi in public transport and had funding from Facebook, were wiped out by the Covid-19 wave.
Online e-commerce platform SkyGarden is the latest casualty in this growing list.
“Five years after launching, Kenyan e-commerce platform SkyGarden may have to stop operations following a failed funding round,” the company announced.
“We have paused the Sendy Supply services, our solution that provides a platform for general retailers to purchase stock at competitive prices from multiple suppliers and manufacturers,” said Sendy founder and CEO Mesh Alloys.
Notify Logistics and WeFarm called it a day in July, with the former citing inability to continue breaking even due to high operational costs while the latter attributed its exit to tough market conditions that had made it difficult to scale.
Notify was running a rent-a-shelf model, which leveraged leasing space before renting it out to a stream of small enterprises that were unable to afford a physical outlet on their own. The business had run for barely five years.
“It has become extremely hard to maintain, and the thing is, we were getting unsustainable with the vendors,” one of the firm’s directors, Helen Nyambura, had said.
WeFarm was running a shop in the form of a mobile app that had been developed to help farmers buy products online as well as share reviews and information with each other.
“We have taken the difficult decision to discontinue one of our services: WeFarm shop. While our shop has seen incredible demand and growth over the past nine months, current market conditions make this avenue a difficult one to set up and to scale,” WeFarm’s director of growth Sofie Mala told media outlet CIO Africa at the time of closure.
The business had been in operation for eight years having been founded in 2014.
