How many startups fail in USA?
Approximately 10% of startups fail within the first year. According to the United States Bureau of Labor Statistics, the startup failure rate increases over time, and the most significant percentage of businesses that fail are younger than 10 years. Over the long run, 90% of startups fail.
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All but the most promising and well-run VC-backed startups struggled to raise funding as venture capital investors became much more selective than they were just a few years ago. As a result, startups that weren’t yet able to sustain their operations without additional funding ran out of money and closed up shop.
Africa Dismay and Startup Going Down
- VC funding in the African startup ecosystem has steadily declined in 2023, causing experts to worry about the future of the once fast-growing sector.
- With fewer investors willing to bet on the continent during the tech downturn, the funding crunch has triggered mass layoffs, slashed valuations, and the liquidation of several African startups.
- Recent news reports of mismanagement and fraud have impacted investor perception, leading to increased scrutiny and demand for credibility from local and global investors.
The funding crunch has already caused several casualties. Since the beginning of the year, at least 10 African startups.
2023 has been a difficult year for African startups. The global economic downturn has led to a decrease in venture capital funding for startups worldwide, including African startups. Funding for African startups has dropped significantly, with estimates suggesting a decline of 50% or more compared to 2022.
Other reasons for the shutdown of African startups in 2023 include:
- Fewer investors willing to bet on the continent
- Mass layoffs
- Slashed valuations
- Liquidation of several African startups
- Fund mismanagement
- Unfavorable market conditions
- Challenges associated with certain business models
- Lack of liquidity in the market
- Difficulties startups use to regularly raising capital
- Inability to convince investors
Other challenges that impact the success of startups in Sub-Saharan Africa include: Infrastructure deficits, Regulatory obstacles, Limited mentorship, Frugality issues, Inadequate marketing and branding. The absence of internet connection is also a factor in limiting the expansion of E-commerce and other business online transactions. This is not just in the rural areas but also in the cities.
Some notable African startups that shut down in 2023 include:
- HytchA Nigerian B2B logistic platform that shut down because it “couldn’t raise [funding] and couldn’t sustain the business with just the money [it was] making”
- OkadaBooksA Nigerian digital publishing platform that shut down due to unspecified “insurmountable challenges”
- DashA Ghanaian payments startup that folded in October amid allegations of financial impropriety and false reporting
TOP TEN African Startups Not Celebrating the New Year 2024
Sub-Saharan Africa faces unique challenges that impact the success of startups. An article published on Medium in April 2023 outlines these challenges, including a lack of funding, infrastructure deficits, regulatory obstacles, limited mentorship, frugality issues, and inadequate marketing and branding.
Sendy: In August, Kenyan end-to-end fulfillment startup Sendy shut down operations and announced a fire sale of assets (it didn’t call it that), with reports saying reduced order volumes and fuel price hikes meant it was making deliveries at a loss, and had a monthly burn rate of US$1 million. Sendy raised US$20 million in capital as recently as January 2020, but in the current climate further funding was not to be found.
54gene: 54gene, a genomics research company that had raised US$45 million across three funding rounds, revealed in September that it had started winding down its operations. 54gene, which has had three CEOs in the last 12 months.
Dash: Ghanaian payments startup Dash, founded in 2019, had raised a whopping US$86 million, but folded in October amid allegations of financial impropriety and false reporting.
WhereIsMyTransport: South African mobility startup WhereIsMyTransport, bankrolled to the tune of over US$27 million by investors such as Naspers in recent years, announced it was closing down in October after failing to secure more investment.
Lazerpay: In April, Lazerpay, a Nigerian crypto and web3 company, confirmed it was shutting down operations after failing to raise additional funding. The startup had laid off some employees last year after the proposed lead investor for its seed round withdrew due to the “market conditions and disagreement on terms”.
Zumi: Kenyan B2B e-commerce startup Zumi announced in March it had closed down after failing to secure the necessary funding to continue operations. Launched in 2016, Zumi began life as a female-focused digital magazine, before pivoting into e-commerce in 2020. According to co-founder and CEO William McCarren, the startup achieved over US$20 million in sales, acquired 5,000 customers, and built a team of 150 people, but closed after failing to secure investment.
Zazuu: Last month, Zazuu, a London-based marketplace for African remittance companies that and raised more than US$2 million in total funding, also shut down, also citing a lack of funding.
Hytch: In February, Nigerian logistics startup Hytch confirmed it had shut down barely nine months after launch.
Okada Books: Nigeria’s Okada Books, founded in 2013 and a pioneer in digital publishing and bookselling, closed down last month, citing rough macroeconomic conditions.
Pivo: Formed by Ijeoma Akwiwu and Nkiru Amadi-Emina in July 2021 and launched in public beta in September, Pivo offered banking services to small supply chain businesses, and raised a US$2 million seed round a little over a year ago. It, too, has now closed its doors, though by all accounts founder conflict also played a part.
Copia: Kenyan e-commerce company Copia, which raised US$50 million Series C funding last year, announced it was pulling out of Uganda, “consistent with many of the best companies in Africa and across the world which are responding to the market environment and prioritising profit.”
MarketForce: Another Kenyan retail-tech startup, MarketForce, is also facing challenges. The company raised US$40 million in funding in February of last year, back in the boom times, but stunningly, certain VCs that had committed funds backed out. In all, US$8 million of that capital was never wired. MarketForce has struggled to raise more capital, announced a bunch of layoffs, and recently turned to crowdfunding to get some cash in the bank.
Twiga Foods: Twiga Foods, a platform that connects Kenyan farmers to food vendors, recently secured undisclosed funding as part of a business refinancing process, just weeks after facing a KES40 million (USD 262,000) debt collection lawsuit. Twiga secured the new funding from Creadev, Juven, TLcom Capital Partners, and DOB Equity, investors that participated in the US$50 million Series C round it raised in 2021.
Paystack: Nigerian payments company Paystack, acquired by Stripe in 2020, has been steadily growing its geographical presence since then, but is now taking a step back. The company announced last month it had reduced its operations outside of Africa, cutting its workforce in Europe and Dubai.
Various sources and documentation were used in this article. Corresponding references are listed in the text of this article as links to connect to for further indications.
Said Cherkaoui 24 