Nine Nigerian Startups Die After $70M Funding Spree
Nigerian Unicorns Fade to Black, Funding Freeze & Due Diligence Deficit Spark a Harsh Winter
Key Points:
- Nine Nigerian startups, despite raising over $70 million, shut down in 2023.
- This was due to a combination of a funding freeze and a lack of thorough due diligence.
- Similar shutdowns across Africa highlight the need for a more balanced ecosystem.
- Investors must prioritize responsible growth and rigorous due diligence.
- Founders must focus on building sustainable businesses.
- Collaboration and a new focus on fundamentals are key to a resilient future.
Silicon Savanna Shrinks
For years, the Nigerian startup scene pulsed with the vibrancy of a lush savanna. Bold entrepreneurs chased dreams, fueled by a tide of investor dollars and the promise of digital revolution.
But in 2023, that savanna witnessed a harsh winter, with nine prominent startups succumbing to the combined chill of a funding freeze and a glaring deficit of due diligence.
Over $70 million, raised amidst the exuberance of 2021 and 2022, evaporated into thin air as ventures like 54Gene ($45 million), Pivo Africa ($2.6 million), and Lazerpay ($1.1 million) closed their doors. This implosion wasn’t unique to Nigeria; across Africa, similar narratives unfolded, raising profound questions about the continent’s tech ecosystem and its future.
A Closer Look at the Fallen Unicorns:
- Pivo: This fintech aimed at small businesses folded despite a $2.6 million raise, allegedly due to internal conflicts.
- Lazerpay: This 19-year-old founder’s crypto dream turned sour after failing to secure follow-on funding.
- 54Gene: This genomics giant, once boasting $45 million, imploded amidst leadership turmoil.
- Bundle Africa: After a $450,000 pre-seed, this social payments app opted for restructuring, focusing on its P2P platform, Cashlink.
- Payday: Facing accusations of founder greed and fraud, this fintech was acquired by Bitmama after a $3 million seed round.
- Zazuu: This cross-border remittance platform shut down despite a $2 million raise, unable to secure further funding.
- Vibra: This blockchain startup, backed by $6 million, closed its doors in Nigeria, Kenya, and Ghana.
- Okadabooks: This pioneer in digital publishing succumbed to harsh economic conditions after 10 years.
- Hytch: This logistics startup barely lasted nine months before failing to secure further funding.
- Due Diligence Desert: A Seed of Doubt Sprouts
Investors Rethink, Founders Brace Themselves
The wake of these closures has triggered soul-searching within the investor community. Eloho Omame of TLCom Capital points fingers at the “fast money, fewer questions” mentality of 2021/2022, where due diligence took a backseat to the allure of “African unicorns.” This laxity, she argues, fueled a bubble ripe for bursting.
Iyinolwa Aboyeji of Future Africa echoes this sentiment, criticizing the “imported deals” fueled by blind optimism and urging VCs to be more transparent about their evaluation criteria. He envisions a future where rigorous due diligence becomes the norm, fostering responsible, sustainable growth.
For founders, the message is clear: prepare for a new era of scrutiny. Gone are the days of quick wins and easy capital. Today, meticulous business plans, strong leadership, and a clear path to profitability will be the golden keys to unlocking investor doors.
Lessons Learned and a Path Forward
While the fall of these startups undoubtedly casts a shadow, it also presents an opportunity for a more balanced, resilient ecosystem.
Here are some key takeaways:
Due diligence must reign supreme: Thorough scrutiny should be the cornerstone of every investment decision, ensuring ventures are built on solid foundations, not fleeting hype.
Founders must focus on fundamentals: Building sustainable businesses with clear paths to profitability, not just captivating pitches, is the key to long-term success.
Investors must prioritize responsible growth: A shift away from chasing “unicorns” and towards nurturing viable, impactful startups will create a more sustainable ecosystem.
Collaboration is key: Fostering closer communication and cooperation between investors, founders, and ecosystem stakeholders will build a stronger, more resilient tech landscape.
The Nigerian savanna may have witnessed a harsh winter, but the seeds of resilience remain. By embracing the lessons learned and nurturing a culture of responsible growth, the ecosystem can enter a new spring, where startups flourish not just under the sun of hype, but under the steady light of due diligence and sustainable practices.
