Not Another Shutdown: Zazuu, Dash, and the Ominous Echo of African Tech’s Dismal 2023

The year 2023 has become, to players and investors in the African tech scene, an unexpected chapter marked by the unraveling of once-promising startups. The echoes of a vibrant 2021 and 2022, where the African tech ecosystem thrived, have now given way to a sobering reality of closures, financial struggles, and dashed aspirations.

The Rise and Fall: A Brief Journey Through 2021 and 2022

Just a short while ago, Africa’s tech market was riding high on success. In 2022, a staggering 633 African tech startups attracted an impressive US$3,333,071,000 in funding, marking a 12.2% increase from the previous year. This surge in growth, a culmination of years of progress, painted a picture of a flourishing ecosystem poised for further expansion.

Fast forward to 2023, and the narrative takes a stark turn. The once-robust flow of venture capital into African startups has dwindled. Only 186 ventures managed to secure investment, raising a total of US$1.4 billion. This represents a significant 48% decline from the lofty US$2.7 billion raised in the first nine months of 2022.

The Causes: Unraveling the Threads

The downturn in the African tech scene is not a happenstance but a consequence of multiple interconnected factors. A global tech downturn has cast a shadow, creating a challenging environment for startups seeking financial support. The repercussions of this shift are far-reaching, with a chain reaction of consequences impacting startups across the continent.

The decline in quarterly figures accentuates the severity of the situation. In Q1, African tech startups secured $649,303,000, marking a 57.2% decrease from Q1 2022. Q2 and Q3 figures further declined, painting a picture of a progressively challenging funding landscape.

Prominent Examples: Zazuu, Dash, 54Gene, Lazerpay, Vibra, Hytch, Sendy

As the funding taps tighten, some notable startups have succumbed to the pressures, facing closures and operational challenges.

Zazzou:

London-based fintech, Zazuu, aimed to revolutionize African remittance but ultimately shuttered due to a lack of funding. Despite raising over $2 million and garnering attention for its innovative approach, Zazuu’s closure underscores the unforgiving nature of the current funding climate.

Dash:

Dash, the Ghanaian fintech with grand plans for cross-border payments, closed its doors after a tumultuous run, plagued by misrepresented user numbers and financial discrepancies. The startup raised $86.1 million in five years, but internal audits revealed a shortfall of at least $25 million, contributing to its downfall.

54Gene:

Genomics startup, 54Gene, secured $45 million in funding but initiated a shutdown process, citing financial constraints and undergoing multiple CEO changes. Established in 2019, the company aimed to bridge the gap in global genomics research by supplying essential genomic data specific to African populations. However, internal challenges and leadership changes led to its unfortunate demise.

Lazerpay:

Lazerpay, a web3 and crypto payment company, faced funding challenges, leading to its shutdown despite enabling over 3000 merchants to transact in various currencies. 

The startup, founded in 2021, developed an API that allowed developers to integrate crypto payments into their platforms. However, the struggle to secure funding and operational sustainability ultimately led to Lazerpay’s closure.

Vibra:

The crypto trading app, Vibra, founded by the African Blockchain Lab, underwent a shutdown in Nigeria, with conflicting reports about its status in other markets. Despite receiving $6 million in VC funding and aiming to drive mass adoption of digital assets in Africa, Vibra faced challenges in meeting customer expectations and maintaining trust, contributing to its closure.

Hytch:

Hytch, a Nigerian logistics startup, ceased operations within nine months, attributing its shutdown to financial struggles and an inability to raise sufficient funds. Initially addressing expensive transportation, Hytch pivoted to B2B logistics but faced challenges in closing funding rounds. The startup’s closure highlights the difficulty of sustaining operations in a competitive market.

Sendy:

Facing financial woes, Kenyan B2B e-commerce startup Sendy is in the process of being acquired, highlighting the challenges in sustaining operations and raising capital. Sendy, once valued at over $80 million, faced workforce cuts and operational changes but struggled to secure additional funding. The ongoing acquisition process marks the end of a once-promising venture in the African tech landscape.

The Ominous Trend: Beginning of the End?

As these shutdowns accumulate, they paint a somber picture of an African tech ecosystem at a crossroads. The once-promising opportunities now face uncertainties, raising questions about the long-term sustainability of startups in the region. The good years of 2021 and 2022 seem to now be unraveling, forcing stakeholders to reassess strategies and navigate an uncertain future.