The Kenyan-founded started was quickly spreading to other emerging markets and this made it to move its HQ to Mauritius in March 2014. It had boasted of connecting thousands of guests and willing hosts to the tune of 150,ooo visitors monthly, had over 1,000 ”SleepOuts” in Kenya and had signed up over 500 properties throughout East Africa while still in BETA in April 2013.
In October the following year, SleepOut was declared winner of the 2014 Startup Battle of the Cities (SBOC) at IdeaLab! – The Founders’ Conference in Germany. SleepOut had castles, rustic holiday homes, italian villas, 5-star resorts and floating cabins and a year later, it was handling over 5,000 accommodation booking requests per month and over 150,000 visitors on average in Kenya alone.
SleepOut CEO and co-founder, Johann Jenson, an ex-UN staff member told TechMoran at that time that the most exciting feature of SleepOut.com is the all-star team of entrepreneurs that were both passionate about the travel industry and African tech comprising of the then CTO Paul Schwarz, a Zimbabwean software engineer with years of experience in the hospitality industry.
In May 2013, SleepOut had raised $200K to expand across Africa and Middle East. With such a start, no one would know the firm would go under a year later even with support from the Mauritius Investment Board. SleepOut had also launched an online magazine NOMAD and was among winners of PIVOT 2013.
What would have gone wrong?
Before we could ask ourselves what would have gone wrong, it’s better to know where and how SleepOut started.
According to Johann, he built Lamu.org in 2011 as a pilot project working closely with holiday home owners and hotel owners on Lamu Island, Kenya.
“At the time it was nearly impossible to find good value accommodation on Lamu Island. To add to this dilemma, pricing for many of the commercial properties was not consistent with the low occupancy which sometimes hovered around 25%,” he told TechMoran in an earlier interview.
Johann built a simple concept to place all the island’s accommodation options on a web platform and connect hosts with empty beds and potential guests looking for great deals. Within 6 months he says Lamu.org was getting great traction and while still at his UN job, Johann got a few partners on board and began listing new accommodation throughout Kenya and relaunched the platform as SleepOut.com.
At the time the biggest challenges was building intelligent accommodation booking software in Kenya as it required a great deal of attention to detail and working closely with both hosts and guests to get the system right.
“In addition to drawing up the right specs, designing awesome software is expensive and in an industry as competitive as travel, you need to get it right,” he told TechMoran. “Our first goal was to build a product that we would use when travelling.”
“The biggest drawbacks to scaling a startup in Kenya is 1) access to basic services such as payment gateways or reliable internet and power; 2) funding opportunities and 3) world-class software engineers,” he told TechMoran. “That being said, all of the above are quickly improving and there are several business opportunities which are uniquely Kenyan including access to unsaturated e-commerce markets, mobile payments, affordable skilled labour, low costs of living and a friendly and hospitable culture of customer service.”
Things didn’t seem to improve for SleepOut as by mid last year, operations at the firm were grounded and customers couldn’t get any support with some of them claiming calls to the firm went unanswered. Johann is now the head of Digital Customer Experience at Hilti and though the site is still online, a lot of funding would be needed to switch on the lights and assemble an A-team to run it.
Johann hasn’t responded to TechMoran’s requests yet and he might not but sources close to the firm say it run out of funds couldn’t sustain its operations. TechMoran is not sure if the firm was revenue positive but even if it was, the closure means the revenues weren’t enough to keep it afloat.
The expansion on Airbnb was also another major blow to SleepOut’s growth and success and though it was focused on Africa and the middle East, it would never have raised enough cash to effectively compete with Airbnb. Others think the firm scaled so fast so quickly. Closing shop is not the end of business but might open a bigger door to more opportunities and the lessons are never forgotten.
For startups in Africa to survive, the tech ecosystem will need to have more than just angel investors. It’s high time institutional investors, VCs and everyone else backed sensible startups such as SleepOut to stay afloat, make money and even inspire others to remain tenacious even during terrible times. Sister site EatOut remains strong and has made acquisitions across East Africa. EatOut is also announcing a massive funding round soon.