Much as we would like to talk about the roses and daisies of the startup world, the funding rounds and bright futures, we still have to face the ugly skeletons in the industry’s closet. It’s hardly surprising that startups fail. 90% of startups fail globally, in Africa, that statistic is twice as high.
Over the past few years, the African tech scene has been bustling with startups, as evidenced by the sudden influx of Vcs and angel investors, lots of good press shining the spotlight and pitching competitions every other weekend. All this is a positive nod for Africa’s startup scene but more often than not, majority of these startups fail. Even the ones that raise good money are not immune to failure on an even larger scale. In the recent past several big names in the industry have bit the dust. This trend has been observed over time and perhaps it’s about time we knew why.
Here are some of them. (Only listed for others to learn from their mistakes)
Launched by ex-Carmudi Nigeria employees, Linda.com.ng, was a dating site which expected to make it easy for singles in Nigeria to find and date other singles easily conveniently and lead to long-term relationships and celebrated marriages.
During the launch Jimi Akinleye, the founder of Linda.com.ng said, “Every single person in the country wants to connect with a member of the opposite sex. They do this because they believe such a connection would lead to a long lasting relationship. Often times, it leads to marriages. We want to be the bridge for such level of interaction. We want to be the go-to place for meeting new people, starting new relationships that would be long lasting and could also lead to marriages.”
The it shut down. Akinleye said the site was shut down because of some reasons such as high customer acquisition costs, too low numbers, bad timing and poor choice of market and the complexity of the product. Akinleye is now deeply into e-commerce and owns a few niche commerce businesses in Nigeria and Ghana and also heads a content marketing agency based in San Diego which helps online businesses in creating excellent content for blogs and social network.
The South African startup, Mxit, launched in 2005, had a very good run, accumulating over 100 million user worldwide before its Swan song in late 2015. The company had done well for the most art, and had even recently expanded into the Indian and Nigerian markets, which are notably very high user markets. Nonetheless they recorded a significant nose dive in active users. They later on shut down all commercial activities and donated all their IP and technology assets to mobile-based public benefit organization The Reach Trust, initially established to improve lives using Mxit technology. However, users are still able to access the social networking services.“Whilst Mxit overall has seen a decline in activity and engagement over the past 18 months, the use of services offered by The Reach Trust on Mxit has been stable and in many cases show an upward trend,” said Francois Swart, outgoing chief executive officer (CEO) of Mxit.
Nigeria’s Yarnable, ran by then CEO Ahmad Mukoshy, was for lack of a better word, a Nigerian twitter. They were unsuccesful in their bid to duplicate something as massive as twitter, despite their being more region specific. The major reason for their failure was lack of funding and technical support, which is basically what afflicts most African based startups. However, the situation looked up a bit when Yarnable was acquired by MobiQube Nigeria Limited.
Another startup that bit the dust around the same time as MXit, though with a much less track record than MXit, is South Africa’s Quweza,a data analytics company centered around the education sector. Their main product aimed to improve the quality of feedback in schools. Their analytics platform is designed to capture, analyze and report student performance data in simple graphs and charts to help educators make smarter decisions. Not a very bad idea, right? So why was Quweza a pitiable flop?
Former Quweza CEO opened up about his experience,“ Things started off great, we had an ambitious, multi-faceted, highly enthusiastic team. We noticed the gap in the market, and we convinced ourselves that there was a market in the gap. In one of our earlier meetings we even projected annual recurring revenue of about R19.2 million a year, this was before we even sat down to talk to a single user or potential client. Why didn’t we, you ask? Well we didn’t have to, we knew exactly what they wanted, duh! At this point in time we didn’t even have a minimal viable product (MVP), actually at no point in this journey did we ever have a minimal viable product, why? Because at this stage of our technology business careers we were not fully aware of what an MVP actually was. As a complete and utter 180 degrees from MVP-ness, we had become best friends with scope creep (“Hey guys, I think we should also add this before we go live…”). During this journey we were still to master the art of testing products on the market, we were still learning the magical ways of being a “lean startup”.
He mentioned several other reasons for failure such as assuming family would be quick to be the earliest paying customers. “One of the early mistakes I made when I was part of Quweza was to assume that family would be quick to purchase your product,” Mmari explained, “If I had the chance to do it again I would go as further away from family as possible. It can get very tricky very fast, when dealing with family and business, especially in the early days. If you do want to get family involved, rather turn to them for funding and hustle hard to get startup capital via angel investments or no-interest loans (or better yet no-loan loans #freeMoney). Just don’t make the mistake of thinking that they will be your first paying clients.” However, the major lesson other startup founders can take away from Quweza is to have a product centered around and validated by the customers. The quickest way to kill your company is to neglect your customer.
Nonetheless, failure is not meant to be a permanent barrier to success but is astepping stone instead.
“Failure is only the opportunity to begin again, only this time more wisely.” – Henry Ford