The Seventh Kenyan Tech Start-up Fails due to Lack of Funding

Zumi, an e-commerce platform dealing with non-food commodities, has closed down after funding dried up, adding to the growing list of tech firms that have failed in recent months, undermining Kenya’s ambition to become Africa’s Silicon Savanah.

In a LinkedIn post, the firm’s co-founder and CEO, William McCarren, cited fundraising challenges as undermining sustainability, stating that the move will result in the layoff of at least 150 employees.

“With a heavy heart, I share the news that Zumi will be closing its doors. The current macro environment has made fundraising extremely difficult, and unfortunately, our business was not able to achieve sustainability in time to survive,” wrote McCarren.

According to Crunchbase, Zumi has raised more than $920,000 (Sh120 million) in funding since its inception in 2016, with McCarren claiming the company achieved over $20 million (Sh2.6 billion) in sales and 5,000 customers during that time.

Zumi, which began as a women-focused digital magazine, exited the media venture to focus on e-commerce after experiencing low digital advertisement revenue.

The firm’s exit is part of a larger trend in which promising tech startups to have been shutting down, with the majority of them citing difficult market conditions as well as funding issues.

This is the seventh Kenyan-based tech start-up to close its doors in the last year, following Kune Foods, Notify Logistics, We Farm, BRCK, and Sky-Garden.

Sendy, for its part, shut down its retail and supplier trading platform, Sendy Supply, and laid off 20% of its employees in October.

Anza Now CEO Bobby Gadhia attributes the rapid collapses to founders’ failure to visualize ideas that provide unique solutions to tangible problems. His initial tech firm, PC World Limited, collapsed in 2016 after being in the game for 21 years.

“Tech is a very tricky space. Unless you have a unique solution that solves real problems, you cannot survive. People usually have emotional connections to their ideas but when you analyse closely, there is no substance to what they are offering,” says Mr Gadhia.

“Another emerging problem is that some entrepreneurs are focused on building businesses for valuation and hoping for big buyouts. The days for that kind of operational model are long gone.”

Concerns that rogue entrepreneurs may be running a fraud syndicate scheme to milk money from donors and divert it into unintended use were dismissed by Gadhia, who stated that “no entrepreneur would tarnish their reputation by engaging in such behavior.”

Due to fears of recession and interest rate hikes, venture capitalists, particularly those from the developed world, have been reluctant to make investments in developing economies.

The dollar’s continued bullish strength against the local currency has been devastating for local companies competing for talent with giant multinationals such as Meta, Google, and Microsoft.