As 2023 unfolds, African startups are undergoing a seismic shift. A steep decline in venture capital funding, particularly pronounced in the fintech sector, has become a critical concern. This downturn is not just a number on a spreadsheet; it represents a tumultuous journey for numerous startups across the continent. The first half of the year alone has seen venture funding plunge dramatically, over 50% less compared to the same period in 2022, a trend that mirrors the global economic climate.
This stark reality has cast a shadow over numerous ventures, particularly in the fintech sector, which had previously been a beacon of innovation and growth across the continent.
This funding shortfall, a ripple effect of global economic conditions, has led to a harsh reality for many African startups. Some have been forced to close their doors, while others have had to make tough decisions to downsize or pivot in an attempt to survive. Amidst these turbulent times, the resilience and adaptability of these startups are being tested like never before.
Pivo
In 2023, the African fintech landscape experienced significant upheavals, with several startups facing closure due to various challenges. Among them was Pivo, a Nigerian digital bank, notable for being both female-founded and female-led. Despite its promising start, including participation in Y Combinator’s 2022 summer batch and securing a $2 million seed round, Pivo’s journey was abruptly halted.
The startup’s downfall was not solely due to the macroeconomic situation or funding crunch, but rather internal conflicts. Disagreements between the founders, Nkiru Amadi-Emina (CEO) and Ijeoma Akwiwu (COO), severely impacted the company’s reputation, business relationships, and team dynamics, ultimately affecting its ability to raise capital.
Zest Money
2023 saw the unfortunate downfall of ZestMoney, a prominent player in the African fintech space. This Buy Now Pay Later (BNPL) firm, despite being backed by heavyweights like Goldman Sachs, faced a shutdown amid regulatory challenges and unsuccessful management changes.
The failure to revive its business led to the laying off of 130 employees, marking a sad end for a startup that once boasted a valuation of $470 million. This decline was accelerated by the collapse of a potential acquisition by fintech giant PhonePe, coupled with difficulties in raising fresh capital amid a harsh funding winter.
Zazzu
In 2023, the African fintech sector faced another significant loss with the closure of Zazuu, a London-based startup specializing in remittances. Zazuu, despite its innovative approach to creating a marketplace for African remittance companies, struggled to secure the necessary funding, leading to its shutdown. Founded in 2018 by Kay Akinwunmi, Korede Fanilola, Tosin Ekolie, and Tola Alade, the startup raised over $2 million from investors like Launch Africa and Founders Factory.
It aimed to reduce the high costs of sending money to Africa by offering a platform where users could compare rates and choose the most economical option. However, the challenges of explaining its unique business model, coupled with stringent licensing requirements and the costs attached, proved insurmountable.
Kippa
2023 marked a challenging phase for Kippa, a Nigerian fintech startup, as it announced the shutdown of its offline payment product, KippaPay. This decision resulted in the laying off of the core team responsible for KippaPay, comprising 70% of the workforce. The company, led by CEO Kennedy Ekezie, described the move as a difficult yet necessary step towards consolidating its profitable product portfolio.
Kippa’s struggles were exacerbated by Nigeria’s currency devaluation in June 2023, which increased operating costs and strained resources, particularly for products requiring international sourcing like point-of-sale machines. Despite its efforts to innovate in the fintech space, including offering bookkeeping solutions to over 500,000 small businesses and launching KippaPay to facilitate invoices and payments, the adverse economic conditions and extended breakeven period led to the product’s unfortunate demise.
Dash
One of the fintech startups Dash, a promising Ghanaian fintech startup, shuttered despite raising an impressive $86.1 million over five years. Founded in 2019 with the ambitious goal of revolutionizing cross-border payments in Africa by connecting mobile money wallets and bank accounts, Dash showed early potential.
It secured one of the largest seed rounds for an African startup at $32.8 million in 2021, led by Insight Partners, and reported significant growth, processing $1 billion in transactions and acquiring a million users across Ghana, Nigeria, and Kenya. However, despite these achievements, Dash couldn’t sustain its operations, exemplifying the challenges and volatility in the African fintech sector.
