Fears linger on survival of startups
Funding for Kenyan start-ups is projected to hit Sh100 billion in the next three years but survival rate concerns are causing jitters within the sector.
It is estimated that in the first three months of 2022 Kenyan startups raised Sh48 billion in venture capital compared to Sh41 billion same period in 2021.
According to Go Gaga Experiential chief executive Norah Muthoni Mumo, most of the incoming cash is going to fund firms in the area of payments and remittances.
“The payment and remittances sector addresses a huge fundamental issue of how to pay and get paid affordably and investors prefer reputable spaces to do so,” she said.
Success rate concerns
Unfortunately, the success rate of these firms is raising concerns as several startups close shop. The most recent being Kune Foods which raised Sh100 million at the idea stage, but has since shut down.
Kune Foods joins among others Swvl and Safeboda as the latest major startups to run into whirlwinds with the cost of doing business rising.
Kune Foods founder Robin Reecht said in a statement on Wednesday that the closure was due to the tough economic times.
He noted that despite offering food at an affordable price of around Sh352, their sales recorded an all-time low, dimming their fortunes.
“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,” he stated.
“Businesses failing happens daily. The death rate is even higher for startups, in any country, the Kenyan startup ecosystem isn’t exempted. Kune failing is a normal thing! What we need to discuss is local founders getting pre-seed funding to also experiment. That is the issue,” said Sheila Birgen startup coach and mentor at Pan-African Innovation Community.
Less than a month ago, Egyptian ride-hailing service, Swvl suspended the daily intra-city rides in Kenya beginning June 3 citing the global economic downturn. Ugandan motorcycle ride-hailing company SafeBoda also terminated operations in Kenya after only two years in the country, citing the negative impact of Covid-19 on business.