$60m Hanging As 9 Nigerian Startups Shutdown In 2023

Over $60 million of investors fund may go down the drain, as nine Nigerian startups have shut down after few years of operation, LEADERSHIP finding has revealed.

After raising millions of dollars from investors, these companies which include Lazerpay, Pivo, 54gene, Bundle Africa, Payday, Zazuu, Vibra, Okadabooks and Hytch, folded up this year, after few years of operation.

The major reason is their inability to raise another fund to run their operations.

For instance, Lazerpay, (a company founded by 19-year-old Njoku Emmanuel), after raising $1.1 million, shut down in April 2023, due to its inability to raise another capital to keep the company floating.

In a press statement, Emmanuel announced that, “Today, we announce the difficult decision to cease operations at Lazerpay. Despite our team’s tireless efforts to secure the necessary funding to keep Lazerpay going, we were unable to close a successful fundraising round.

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“We fought hard to keep the lights on as long as possible, but unfortunately, we are now at a point where we need to shut down.”

Zazuu, a fintech company founded in 2018 by four Nigerian entrepreneurs, also shut down its operation in 2023 due to its inability to secure additional funds from investors.

Recall that Zazuu, an end-to-end money transfer marketplace that facilitated remittance payments into Sub-Saharan Africa, had in July 2023, raised $2 million to deepen its cross-border payment offering and also build the world’s first non-biased payment platform.

However, the company announced on November 17, 2023, that it was shutting down operations, due to its inability to secure additional growth funding from investors.

The same fate met 54gene, a genomics research company that raised $45 million across three funding rounds, but announced in September that it had started winding down its operations.

Similarly, fintech company, Payday, ran into a problem barely six months after raising $3 million in a seed round led by Moniepoint, as management of the company, early this month, announced that it has been acquired by Blockchain payments platform, Bitmama Inc.

In February, Nigerian logistics startup Hytch confirmed it had shut down barely nine months after launch.

The closure came about after it failed to secure further funding. “It has been a tough one but we are shutting down operations finally,” the company said in a social media post. We would no longer be providing our services to businesses or individuals,” the company said in a statement.

Founded in 2013 and a pioneer in digital publishing and bookselling, Okada Books, closed down in November this year after 10 years of operation, citing rough macroeconomic conditions. In 2017, Okadabooks was among 12 startups selected for Google’s Launchpad Accelerator Africa.

“We explored various avenues to keep our virtual bookshelves alive but, unfortunately, the challenges we face are insurmountable,” said Okechukwu Ofili, the company’s CEO, in a social media statement.

Exactly two years ago in December 2021, Nigeria-based African Blockchain Lab, Vibra raised $6 million in a pre-Series A round co-led by a consortium of global investors, including renowned African venture capital firms Lateral Frontiers VC, CRE Venture Capital and Musha Ventures, as well as international blockchain investors Dragonfly Capital, Hashkey Capital, SNZ Capital, Fenbushi, Cadenza Capital, Head & Shoulder X, LeadBlock, Hash Global, Bonfire, Krypital, Despace and more.

However, in July this year, the company shut down its operations, not only in Nigeria but also in Kenya and Ghana.

Also, Pivo, a Nigerian fintech that offered banking services to small supply chain businesses, announced it was shutting. This came one year after raising more than $2.6 million from Y Combinator, Ventures Platform, Mercy Corp Ventures, and over 15 other investors and also raised a $2 million seed round in November 2022.

Meanwhile, Nigerian crypto startup Bundle Africa announced that it would shut down its social payments app Bundle Africa, after raising $450,000 in a pre-seed that had participation from two investors.

Meanwhile, chairman, Signal Alliance Technology Holdings (SATH), Collins Onuegbu, told LEADERSHIP that the dwindling of funding from investors was the main reason why these startups folded up.

Recall that due to a lack of finance, the African startup scene has seen a 37 per cent annual funding decrease, reaching $4.1 billion as of June 2023. According to Africa: The Big Deal, startups throughout the continent had raised $6.5 billion as of June 2022.

When the data is magnified, a more dire picture emerges. Only $2.1 billion was raised by African entrepreneurs through equity capital, a significant decrease from the $5.6 billion they raised during the same period in 2022. This indicates that compared to earlier, entrepreneurs are depending more on loan financing. In addition, the number of unique investors decreased to 800 from 1,100 in the previous month, and fewer businesses are receiving finance.

Nigeria’s climate is more severe, as seen by the 77 per cent decrease in startup investment for the nation’s businesses. Compared to the $2 billion they raised between July 2021 and June 2022, Nigerian entrepreneurs were only able to raise $470 million between July 2022 and June 2023.

This dwindling funding really affected a lot of startups in Nigeria, Onuegbu averred, even as he disclosed that, normally, a startup thrives when it raises additional money to expand its business.

“But if it becomes difficult for startups to raise additional money to grow their business, then they would run into problem.  Some of them folded up because there was no additional money to grow their business,” Onuegbu further explained.

He posited that the implication of this new trend is that, some new startups would find it difficult to raise fund to start their business, as investors are now careful on where they are putting their money.

“What will happen is that new startups will now embark on businesses that require less funding. However, there is still funding in the market for startups. The only challenge is that the funders will now be very careful with their money, as they would need to carryout due diligence on any companies they will be funding in the coming year. Part of what they will be looking at is if the company has cash flow,” he asserted.

He also pointed the downtime in the Nigerian economy which have marred the growth of companies. “The Nigerian economy has struggled in the whole of 2023. Startups were not immune to the challenges which ranges from forex scarcity, power challenge to foreign exchange rate, among others.

He advised startups to focus on a model that allows them to manage their cash flow and generate money internally to grow their business. This can be a hedge, especially when external funding is not available, he added.

The chairman averred that a lot of startups are doing well, despite the downtime of funding, adding that, “the downtime will definitely pass. It will not last forever, hence the reason I am urging startups to brace up for this difficult time, while anticipating a brighter future.”

In the same vein, Africa’s digital entrepreneur and chairman, Zinox Group, Leo Stan Ekeh, has expressed optimism that the Nigerian economy would survive the present challenges and rebound stronger.

Ekeh averred that, ‘‘the current challenges in the economy are not new. We have witnessed similar cycles in the past. But our economy has always shown resilience to rebound from them. Also, you must bear in mind that the difficulties are not only local. The global economy is passing through a period of intense stress, further worsened by the conflict between Russia and Ukraine and potentially set to be impacted further by the latest confrontation between Israel and Hamas.

‘‘In times like these, the failure rate of startups and other businesses increase. However, difficult times also represent periods of great opportunities. It is your responsibility to sniff out those opportunities which abound around you and take advantage of them.

‘‘You must always remember that to succeed, you cannot take pleasure before pains. In setting up your business, you must have a clear roadmap and vision. Hype is good and gets you noticed but you must work very hard behind the scenes to fill up the blank spaces with substance. Otherwise, the hype will fizzle out and you will have nothing concrete to stand on. You must also remain spiritually strong, retain a healthy risk appetite, and rely a lot on your intuition and common-sense logic to make a success of your venture. Finally, never forget that your passion must pay your bills,’’ he advised.

He also urged young business owners and startups in Africa to demonstrate a high level of integrity and diligence when executing contracts as the quality of their country defines their future.