Great businesses start with a having great idea, and this foundational principle has inspired dozens of generations of aspiring entrepreneurs to believe that idea and a lot of hard work is enough for anyone to become a billionaire.
Unfortunately, for them, the reality is different. Just because all good businesses need a good idea to get started doesn't mean that a good idea is the only thing needed to succeed in business. So many startups have been created out of good ideas, only to collapse under their own weight, fall victim to competitors, or fail to gain momentum from the start. In 2015, Fortune estimated that nine of ten startups would fail and in 2016 the Huffington Post said it was 95%. In Africa, however, the business space is even less conducive for startups to survive as most of them fail even before they make it to their seed funding stage.
According to the “The Better Africa“ report published by Weetracker in partnership with GreenTec Capital Africa Foundation, the shutdown rates for startups on the African continent between 2010-2018 was at 54.20%.
Further, the report showed that Ethiopia (75%), Rwanda (75%) and Ghana (73.91%) were among the countries that experienced the highest shutdown rates amongst startups while Nigeria - among prominent startups hubs in Africa - witnessed maximum shutdowns at 61.05%, followed by Kenya at 58.73% and South Africa 54.39%.
Why Do Startups Fail?
There are quite a number of factors responsible for the failure of African startups. Let’s look at some of the African startups that had amazing ideas and failed, and why they failed
SuperGeeks - failed due to the onerous terms and conditions of investors
Co-founded by Edmund Olutu and Samuel Uduma, SuperGeeks, Nigeria’s version of Geek Squad, was described by CNN as “finding considerable traction”. Two years after the company launched, its domain name was up for sale with one of the co-founders explaining in an interview with Quartz that the decision of a “controversial” investor to pull out of a multimillion-dollar investment commitment was the last straw that sealed the fate of their young business.
ORide - failed due to the harsh business environment
Popular Chinese-owned African fintech startup, Opay stormed the market with a full marketing force when it launched in 2019. Within 6 months of operations, the company had expanded to about 6 cities across the country with a very visible presence in each. However, its activities came to a significant halt as soon as the Lagos State Government banned motorcycle operations in some highbrow areas. A few months after the ban, some of Opay’s business units like OCar, ORide, and OExpress were also discontinued. The firm made it known that it had to discontinue these services to pay attention to Fintech and offer financial services to the millions of customers it had already acquired.
Afrostream - failed due to lack of adequate funding
Afrostream was a Cameroonian startup that was on the scene for just three years. It came into existence in 2014 and was off the scene in 2017. It was founded by Tonje Bakang and functioned as a video-on-demand firm that had a good store of African, as well as Afro-American movies. Based on the structure of this startup, it appeared like it was patterned after Jason Njoku’s iROKO. Unfortunately, it was not meant to last a long time. This startup was backed by Y Combinator and also had five other investors provide funding. Regardless of the backed investors, it was out of business in three years. Considering the fact that this startup had five investors, it might be normal to assume it had the right level of finance. Nonetheless, the founder made it known that it could not raise funding to acquire the much-needed content, and upon sensing the startup was going to go nowhere without access to funds, made attempts to sell it.
Wala - failed due to poor internet infrastructure
The crypto industry seems like one that could never go wrong. Nonetheless, things are not as rosy as they seem. Wala, a South African crypto startup is a perfect example of the challenges crypto firms could face in the African business space. While it existed, Wala was a South African startup that had operations in Uganda. It made use of an app that was crypto-powered to help the unbanked in Africa carry out financial transactions effortlessly. All was going on smoothly until things suddenly began going south.
In early 2019, Wala had to do away with its staff and closed access to its app. Although a lot of factors could have been responsible for this startup not making it to the top, Smer Saab, its co-founder claimed poor internet infrastructure, as well as business regulations in Uganda, were responsible for the bad turn of events.
To spearhead the operations of a successful business, Entrepreneurs must be aware of market conditions, environmental changes and must adopt a proactive method to solving challenges that may be posed to the firm .
Writer: Joseph Obeng Junior
Editor: Herbert Afriyie
publisher : Kelvin Mbir
Credit : Business insider
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