Recent investigations by NATIONAL ECONOMY revealed a grim financial landscape as nine prominent Nigerian startups face closure in 2023, placing over $60 million of investors’ funds in jeopardy.
The affected startups, namely Lazerpay, Pivo, 54gene, Bundle Africa, Payday, Zazuu, Vibra, Okadabooks, and Hytch, have officially ceased operations, grappling with the daunting challenge of securing additional funding to sustain their ventures.
Lazerpay, an enterprise founded by the precocious 19-year-old Njoku Emmanuel, ceased operations in April 2023 despite successfully raising $1.1 million earlier. Emmanuel, in a somber press statement, explained, “Despite our team’s tireless efforts to secure the necessary funding to keep Lazerpay going, we were unable to close a successful fundraising round.”
Zazuu, a fintech company specializing in remittance payments, faced a similar fate. After raising $2 million in July 2023, it announced on November 17, 2023, that it was shutting down operations due to an inability to secure additional growth funding.
54gene, a genomics research company that had raised an impressive $45 million across three funding rounds, initiated the process of winding down its operations in September. The founder, whose name wasn’t mentioned in the article, expressed the difficulty faced despite substantial previous funding.
Fintech company Payday encountered a different challenge, being acquired by Blockchain payments platform Bitmama Inc. a mere six months after securing $3 million in a seed round led by Moniepoint.
Hytch, a logistics startup that launched just nine months before shutting down in February, attributed its closure to the inability to secure further funding. In a social media statement, the company announced, “It has been a tough one, but we are shutting down operations finally. We would no longer be providing our services to businesses or individuals.”
Okadabooks, a pioneer in digital publishing and bookselling, announced its closure in November after ten years of operation. The CEO, Okechukwu Ofili, cited insurmountable challenges amid rough macroeconomic conditions.
Vibra, an African Blockchain Lab, raised $6 million in a pre-Series A round two years ago. However, in July this year, the company closed its operations in Nigeria, Kenya, and Ghana, showcasing a challenging environment for startups.
Pivo, a Nigerian fintech offering banking services to small supply chain businesses, also announced its shutdown. This came a year after raising over $2.6 million from various investors, including Y Combinator, Ventures Platform, and Mercy Corp Ventures.
Bundle Africa, a crypto startup, decided to shut down its social payments app after raising $450,000 in a pre-seed round. The closure followed the initial excitement of securing investments from two backers.
The downturn in funding has been identified as the primary reason for these startups folding, as noted by Collins Onuegbu, Chairman of Signal Alliance Technology Holdings (SATH).
He highlighted the impact of the dwindling funding trend, emphasizing, “What will happen is that new startups will now embark on businesses that require less funding.”
The data suggests a challenging environment for startups, with a 37 per cent annual funding decrease in the African startup scene. Only $2.1 billion was raised by African entrepreneurs through equity capital as of June 2023, a significant drop from the $5.6 billion raised during the same period in 2022.
Onuegbu also pointed out the challenges posed by the Nigerian economy, such as forex scarcity, power challenges, and fluctuations in foreign exchange rates, which have affected startups throughout the year.
Despite the prevailing challenges, he urged startups to focus on models that allow them to manage cash flow and generate internal revenue for sustainable growth. He emphasized the importance of due diligence for investors in the coming year, stating, “Part of what they will be looking at is if the company has cash flow.”
In contrast, Leo Stan Ekeh, Chairman of Zinox Group, provided a message of optimism, stating, “The current challenges in the economy are not new.” He urged startups to recognize opportunities within difficulties and stressed the importance of passion paying bills.
As startups navigate this challenging financial landscape, stakeholders advise resilience, internal revenue generation, and a strategic approach to secure a brighter future.
