Monday, August 15, 2022
Monday, August 15, 2022
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What Happened to Kune Foods?

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Kune foods has been besieged by controversy from the moment the company launched in Kenya.  A couple of days after their launch their Founder and CEO Reecht said, “After coming to Kenya for three days, I asked where I could get good food for a cheap price and everyone told me it was impossible,” he told TechCrunch. “It’s impossible because you either go out on the street and eat street food, which is really cheap, but not so good quality, or you order from Uber Eats, Glovo or Jumia, where you can get quality but have to pay at least 10 US dollars.”

His statement received immediate backlash because many Kenyans argued that the startup was solving a non-existent issue given the existence of hundreds of restaurants serving and delivering affordable meals. Kune immediately issued an apology, expressing regret for how the statement came out and tried to explain it but the damage had already been done.

On the back of that initial controversy, Kune Foods raised USD $1M in pre-seed capital and once again there was uproar. This time Kenyans especially in the startup space could not figure out how a startup that did not have a clear problem statement, easily and in a short period of time, raised that much money. It is very hard for African tech innovators to raise even USD $100,000 for their budding companies. Many felt that this was just the biggest sign of racial inequality in the African tech space, where White founders get funding for “not great” ideas whilst black founders get shunned until they have a white cofounder. The waters had been muddied, but with the million-dollar war chest, Reecht had no time to waste.

Kune proceeded to expand rapidly, building a huge production Kitchen, hiring 90 members of staff, selling more than 55,000 meals, and acquiring more than 6,000 individual customers and 100 corporate customers. It, therefore, came as a rude shock to the entire continent when Reecht announced Kune Foods was shutting down, barely 11 months after launch and just four months after the startup started its commercial operations in Kenya

In his heartfelt statement, Reecht said, “With the current economic downturn and investment markets tightening up, we were unable to raise our next round. Coupled with rising food costs deteriorating our margins, we just couldn’t keep going.”

The question on everyone’s mind is, “what really happened to Kune Foods?”

Was there really a problem to be solved? Now, Kichen Urban had tried to implement this same model a couple of years ago and it does seem that despite their raging success in the 2017-2019 era, they have since closed down. Was the problem food availability or was the problem distribution? I struggle to understand what the overall objective of Kune Foods was. What is completely mind-blowing though is that this startup burned through over USD $1M of investor funds in a year as well as an undisclosed amount that was taken as a loan from a Kenyan Bank.

The loan is something I am equally struggling to understand. Kenyans do business in this country for decades and they have trouble accessing credit from their banks; leading to the proliferation of shylocks, predatory Mobi-lending apps and credit organizations. Yet, here comes a foreigner, at the height of the pandemic and one of the worst economic recessions Kenya has faced, who walks into the bank and leaves with an undisclosed amount as a loan for his business that is yet to validate its business model or even make a single shilling in profit.

Technology startups are often rewarded for a “fake it ‘til you make it” mentality by venture capital firms willing to throw money at a product until it meets expectations. Away from Reecht’s statement all we can do is speculate why they went down so quickly.

It could be that they may have raised too much, too soon. Perhaps the entire goal was to raise money and then get someone else to take it over. It does feel like their burn rate was a bit out of control, particularly for a company with barely enough revenues. According to several trusted sources close to the company, Kune’s mistake from the onset was that the problem statement was never as compelling as it needed to be, given that it was trying to disrupt the food space which already has a lot of established players. Were they a food distribution company or were they trying to produce healthy meals? Or both?

Ultimately, the only way for a startup to be successful, is to focus on acquiring new customers, upping transaction volume and increasing customer spending. Kune Food will serve as a cautionary tale of a startup overspending in hopes of finding product-market fit before running out of investor funds. Perhaps if the management had been more tight-fisted, saved cash to extend their runway and given their clients more time to become brand loyalists, they might have survived, thrived even. Sometimes having the most money, the best Public relations strategy and the most illustrious sponsors can’t save a startup from mismanagement.

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