In Africa, new businesses are going through a phase of introspection and adjustment as emerging entrepreneurs decide to give back the remaining funds to investors and close down their operations. This trend reflects a larger pattern in the technological landscape of the continent, where start-ups are encountering difficulties in obtaining financial support and establishing themselves in competitive industries. A start-up known as Thepeer, which is based in Nigeria, set out to transform the landscape of digital payments for businesses.
Despite successfully securing a significant seed funding of USD 2.1 million, the company encountered major obstacles in the form of compliance difficulties and a sluggish uptake of digital wallets. Thepeer has decided to stop its operations and give back capital to its investors in a recent public announcement made on April 1, 2024. This decision came after realizing the necessity for a thorough re-evaluation of its strategy, as the company has faced challenges in gaining momentum.
Cova faced major challenges in maintaining operations.
The exact amount being returned to investors was not revealed. At the beginning of the year, 2024, Cova, a Nigerian start-up in the wealth technology industry, closed its doors due to difficulties in expanding its services, regardless of its goal of becoming a reliable asset management platform providing accurate information. Despite initially achieving success and receiving substantial funding, the start-up ultimately faced major challenges in maintaining operations due to increasingly difficult fundraising conditions and scaling issues.
Also, the choice to cease operations and refund remaining capital highlights the common struggles experienced by numerous start-ups in Africa as the tech industry continues to rapidly change and grow. The changes are indicative of a larger transformation happening in the start-up and venture capital landscapes, both at a regional and international level. The previously growing enthusiasm for the technology sector of the African continent has transitioned into a more careful and selective attitude from investors.
Africa’s scene is still developing, experiencing challenges.
With funding becoming scarce and a closer examination of companies’ core strengths, start-ups are now having to rethink their plans and prioritize long-term viability. The obstacles faced by Thepeer and Cova symbolize the larger issues African start-ups face when trying to secure funding and establish a presence in the market. While there have been considerable improvements in the tech industry in recent times, the continent’s start-up scene is still developing, experiencing challenges and setbacks in different sectors as it grows.
More so, start-ups are having to make difficult decisions in order to adapt to the current challenges, with many choosing to pivot, reduce their size, or even close down completely, as evidenced by numerous instances in the past year. 54gene, a genomics company from Nigeria, WhereIsMyTransport, a transit data provider from South Africa, and Sendy, a logistics platform from Kenya, were among the prominent African start-ups that ceased operations in the previous year. The closure of Dash, a fintech company from Ghana, under scandalous circumstances was considered a particularly significant setback.
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A total of around fifteen tech start-ups in Africa announced their closures in 2023 after collectively raising over USD 200 million, according to a compilation by Afridigest, a tech publication. Although the challenges may appear daunting, they can also serve as a catalyst for reflection and creativity in the ecosystem. Through analyzing the journeys of innovative companies such as Thepeer and Cova, entrepreneurs and investors have the chance to pave the way for sustained expansion and lasting achievements in Africa’s thriving tech landscape.
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