2024 has been a year of ups and downs for Kenyan startups as entrepreneurs and enterprises try to balance an uncertain economic and political environment at home, and the continuing funding winter on the continent.
The year began on a depressing note when B2B e-commerce startup – Marketforce – downscaled operations in three of its five markets and sought to explore other business models.
The startup, founded in 2018 by Tesh Mbaabu and Mesongo Sibuti, was present in Kenya, Nigeria, Uganda, Tanzania and Rwanda. It had also planned to expand to Ethiopia and Ghana through a partnership with Cellulant.
The company raised US $40 million in Series A funding in February 2022. Mbaabu said that Marketforce was “exploring other high margin opportunities in adjacent verticals, such as social commerce” amidst macroeconomic challenges and depreciating prospects in ecosystem funding.
Earlier in the year, Twiga Foods – an ailing startup – got some reprieve after Incentro Africa agreed to withdraw a demand filed late last year against it over a Google Cloud Service dispute. Both parties resolved to renegotiate the terms of the Google Cloud contract in light of the harsh global economic climate and Twiga’s revenue crunch.
Opportunities for the Ecosystem
The Two Rivers International Finance and Innovation Center (TRIFIC) Special Economic Zone (SEZ) opened its doors in February. It invited financial entrepreneurs, Venture Capitalists, and Startup founders interested in broadening their operations while minimizing business costs.
The SEZ geared to serve companies within the services sector introduced an array of incentives like tax exemptions – such as the Capital Gains Tax and Repatriation Tax on Dividends. Businesses within TRIFIC SEZ would pay only 10% Corporate Tax for the first 10 years and 15% for the subsequent decade enabling startups to raise capital easily.
The SEZ wants to attract foreign startups and firms that would improve the country’s Foreign Direct Investment (FDI) at a time when forex reserves were precariously low.
The Winners
Some of the Kenyan startups that raised capital this year include Bio-Logical (raised US$1.3 million), Uncover Skincare (raised US$ 1.4 million), Pula (raised US$20 million), SunCulture (US$12 million), and Chpter (US$1.2 million).
E-mobility startups had a good run this year. BasiGo received KSh1.3 billion from the United States International Development Finance Corporation (DFC) to increase local assembly of its buses. It also got pledges of over US$300 million from a Norwegian Fund meant to support e-mobility.
In May this year, EV manufacturer Spiro bagged KSh 6.5 billion loan from the Afreximbank to expand its footprint in the continent. The agreement signed in Kigali, Rwanda bolstered the company’s coffers, supplementing the KSh 8.2 billion they got last year from Societe Generale. The company operates about 600 battery swapping stations in Africa.
Ugandan mobility startup SafeBoda resumed operations in Kenya in February this year after pausing operations in the country since 2020. SafeBoda had temporarily suspended its operations during the COVID-19 pandemic. The re-entry into the Kenyan market saw the introduction of a new product called ‘SafeCar’ and a fleet of electric bikes in April.
Failed Startups
Copia went under administration in June after laying off 1,000 employees and shutting down operations in key locations countrywide. By the time of the collapse, Copia had a total capital injection of over US$100 million, making it one of the most-funded startups in Kenya.
Its challenges began last year after exiting the Ugandan market in April 2023. Copia’s commitment to realign its strategies was scoffed at by the vulnerabilities of its business model.
On the flip side, iProcure went under administration in April this year. Founded a decade ago by Stefano Carcoforo, Nicole Galletta, Patrick Wanjohi and Bernard Maingi – the startup connected suppliers and retailers in the agricultural sector, providing both inventory management and credit facility services.
Despite raising US$10.2 million in Series B funding and conventional debt in August 2022 to fund its expansion across East Africa, the startup struggled with cash flow constraints and a high burn rate.
Agri-data platform, Gro Intelligence, shut down in June after months of capital shortage, leadership changes, and a controversial restructuring at the beginning of the year.
The startup, based in New York and Nairobi, laid off 60% of its staff in March this year, a move that was investigated by the Securities and Exchange Commission (SEC). According to former employees disgruntled by the manner of their expulsion, they had not received prior notices of the mass layoff, a situation which violates labour laws.
The company received US$ 85 million in Series B funding in 2021 and appeared at TIME magazine as one of 100 most influential companies in the same year. Although it seemed like Gro Intelligence would prosper, former employees cited that the company survived on a precarious revenue model that was unsustainable.
Wasoko
E-commerce startup, Wasoko, won a court case in June this year against nine ex-employees. An earlier verdict from the Employment and Labour Relations court mandated the ailing startup to retain the ex-employees in its payroll.
Wasoko denied the allegations made by the disgruntled employees who stated that due process was not followed. The startup argued that redundancy notices were issued in December 2023 and that no labour laws were flouted.
The victory perhaps edged Wasoko to finalize its merger with Egyptian e-commerce startup MaxAB. Despite months of delays, the combined entity was announced in August this year and will continue its operations within Egypt, Kenya, Morocco, Rwanda, and Tanzania.
