A report by Startup Graveyard has identified funding shortages as the primary cause of African startups’ shutdowns in 2024, the same as in 2023.
It, however, noted that a new trend emerged in 2024 with failed expansions into new product lines by startups leading to a lack of product-market fit and eventual discontinuation.
“In 2024, lack of funding still remained a major factor; however, a new problem emerged.
“Some startups expanded beyond their original product offerings to offer novel services, as seen with JumiaFood and BuyCoins Pro. These services were discontinued due to a lack of product-market fit, with the startups announcing a pivot to focus on their core services,” the report stated.
The shutdowns
According to the report, 18 startups shut down in Africa in 2023. The figure, however reduced in 2024 as 11 shutdowns were recorded.
Out of the 11 startups that shut down, hibernated or entered administration in 2024, the report shows that six of them were Nigerian startups.
These include:
- ThePeer (Nigeria)
- HerRyde (Nigeria)
- Chopnownow (Nigeria)
- Cova (Nigeria)
- BuyCoinsPro (Nigeria)
- Quizac (Nigeria)
- GroIntelligence (Kenya)
- CopiaGlobal (Kenya)
- RejaReja (Kenya)
- iProcure (Kenya) and
- LetsChat (multiple countries.
Regulatory and structural challenges in Nigeria
Aside from the funding challenge, the report identifies regulatory and structural challenges as other obstacles to startup success in Nigeria.
It noted that Nigeria’s startup ecosystem faces unique hurdles, including unreliable power supply and sudden regulatory changes.
A 2018 report found that 24% of fintech startups cited an unfavorable regulatory environment as a major obstacle.
It added that some startups in the region have changed their business models and developed innovations to suit the current regulatory policies, which has also hindered potential international investment
“Notable cases, such as the Central Bank of Nigeria’s introduction of the cybersecurity levy and Electronic Money Levy Transfer (EMTL) as government-mandated fees for all electronic transfers, visibly affected fintech startups that gained traction for free mobile money transactions,” the report stated.
Funding limiting African startups
Citing Crunchbase data, the report noted that about 1,200 startups globally have achieved unicorn status (valued at over $1 billion) as of 2024.
- However, only nine of these are from Africa. The report attributes this to insufficient capital for scaling and an underdeveloped venture capital (VC) ecosystem concentrated in a few key markets—Nigeria, Kenya, South Africa, and Egypt.
- It added that African startups receive significantly less funding than their counterparts in developed economies, partly because many VCs apply Silicon Valley business models without adapting to Africa’s unique challenges.
- While critics argue that investors should better understand the African market, Startup Graveyard noted that startups also need to demonstrate profitability to attract more funding.
