Nigerian startups 2023 shutdown costs investors $79m

Seven Nigerian startups that have announced they will be shutting down operations this year, will cost investors $79.15 million in funding deals, BusinessDay can report.

The country has witnessed an unprecedented shutdown of startups in 2023 as about eight exited the tech ecosystem, citing operational difficulties. Seven of the startups are responsible for the $79.15 million funding that investors would not be making any returns from.

Among the startups BusinessDay tracked are Lazerpay, which raised $1.1 million; 54Gene, $45 million; Pillow, $21 million; Vibra, $6 million; Bundle, $450,000; PayDay, $3 million; and Pivo Africa, $2.6 million.

Startup shutdowns were also rampant in other parts of Africa this year. In October alone, three notable startups across different countries shut down their operations. Sendy, a Kenya logistics startup that facilitated purchases of FMCGs from manufacturers for retailers, shut down in August and is exploring the possibility of selling its assets. WhereIsMyTransport, a South African mobility startup also closed down operations in the same month after failing to secure the necessary funding to continue operation. Another shutdown in October was Dash, a Ghanaian fintech company that connects mobile money wallets and bank accounts across Africa.

According to some experts, startup shutdowns are not new. The case of Nigeria only reflects the general market sentiments which shows that the global tech industry is facing difficult times.

“The rush to publicly borderline celebrate or even just pontificate over the demise of startups or the failure of specific efforts by others we do not know is perhaps the most unproductive use of human capacity,” said Kola Aina, General Partners of Ventures Platform Fund. “Most times, people who exhibit this behaviour have never actually built. When you have built and maybe blessed yourself with failure, you will reconsider before you make light of an honest effort.”

Some of the startups blamed the inability to raise more funding as the primary reason they were shutting down. Lazerpay, for example, said it was unable to close a successful fundraising round.

“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,” Emmanuel Njoku, founder and CEO of the company said in April.

Hytch, a logistics startup, announced in February it was shutting down because it couldn’t raise funding. Laolu Onifade, the co-founder and CEO of the company told TechCabal, “We couldn’t raise and couldn’t sustain the business with just the money we were making.”

However, the decision to shut down startups like 54Gene, Pivo, Bundle, Vibra, Payday, and Pillow was different from the inability to raise funding.

Bundle, a cryptocurrency exchange, said it was shutting down as part of the shareholders’ decision to restructure the business to focus on Cashlink which had recorded over 3 million transaction volume.

Vibra, a pan-African crypto, shut down in April claiming it was pivoting to another business. It, however, did not provide specific details about the ongoing pivot. The company also closed operations in Ghana and Kenya.

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Pivo, a digital bank for trade, shut down due to an unresolved founder conflict according to reports. Some experts said there is a need to be more transparent about the reasons startups are shutting down in the country. Doing so will either serve as a lesson for other startups and founders or help investors make informed decisions. In nearly all the shop closures, the reasons given were not detailed and sometimes vague.

“Can we at least be intellectually honest about why companies are shutting down? Sure, the funding downturn may have played some role, but that’s not the real reason,” said Justin Norman, founder of The Flip Africa.

Payday is the only startup on the list that went on to be acquired. However, there are reports from different sources that the $3 million funding he raised by the founder from Moniepoint and other investors, may not have been well managed.