Seventh Kenya tech start-up goes under on lack of fundingWednesday March 22 2023
Another tech start-up, Zumi, an e-commerce platform dealing with non-food commodities, has shut down after funding dried up, adding to the growing list of tech firms that have collapsed in recent months hurting Kenya's dream of becoming Africa's Silicon Savanah.
In a LinkedIn post, the firm’s co-founder and CEO William McCarren cited difficulties in fundraising that undermined sustainability saying that the move will result in at least 150 employees being laid off.
“With a heavy heart, I share the news that Zumi will be closing its doors. The current macro environment has made fundraising extremely difficult, and unfortunately, our business was not able to achieve sustainability in time to survive,” wrote McCarren.
Crunchbase records show that Zumi has since its inception in 2016 raised more than $920,000 (Sh120 million) in funding with McCarren saying the firm achieved over $20 million (Sh2.6 billion) in sales and had 5,000 customers within the period.
Zumi, which started as a women-focused digital magazine, bowed out of the media venture to pivot to e-commerce after struggling with low digital advertisement revenue.
The firm’s exit forms part of a continuing trend where promising tech startups have been on a shutting spree with most of them citing difficult market conditions as well as funding hitches.
This is now the seventh Kenyan-based tech start-up after Kune Foods, Notify Logistics, WeFarm, BRCK and Sky-Garden who closed shop in the last year, resulting in hundreds of job losses.
On its part, Sendy shut down its retail and supplier trading platform known as Sendy Supply and cut 20 percent of its workforce in October.
Anza Now CEO Bobby Gadhia, whose initial tech firm PC World Limited collapsed in 2016 after being in the game for 21 years, credits the rapid collapses to founders’ failure to visualise ideas that provide unique solutions to tangible problems.
“Tech is a very tricky space. Unless you have a unique solution that solves real problems, you cannot survive. People usually have emotional connections to their ideas but when you analyse closely, there is no substance to what they are offering,” says Mr Gadhia.
“Another emerging problem is that some entrepreneurs are focused on building businesses for valuation and hoping for big buyouts. The days for that kind of operational model are long gone.”
On the concerns that rogue entrepreneurs could be running a fraud syndicate scheme to milk money from donors and divert it into unintended use, Gadhia dismissed it as far-fetched asserting that “no entrepreneur would tarnish their reputation by engaging in such behaviour.”
The funding drought for startups in developing economies has revealed a lacklustre tendency by venture capitalists, especially from the developed world, to push forth investments due to fears of recession and interest hikes.
The continued bullish strengthening of the dollar against the local currency has also had devastating effects on local companies that have been competing for talent with giant multinationals such as Meta, Google and Microsoft.