When your big swing is a big miss

Welcome to Tech Safari!

Your tour guide on African Tech 🧭

Hello to the new folks who have joined the Safari since the last edition.

If you haven't subscribed, join thousands of smart folks curious about Tech in Africa.

It’s event season!

We’re pumped to announce our first speaker at Afrotech Fest in London.

Find out who it is here and get your ticket to Afrotech Fest here.

Before we dive in, who will be in Marrakech, Morocco for GITEX in a few weeks? Let me know in the poll below.

Alright! Let’s dive into this week’s edition.

It pays to solve a hard problem in tech.

In 2014, Karim Beguir and Zohra Slim started a scrappy web design service in Tunisia.

They turned it into a beast - building AI solutions for global companies.

And last year, BioNTech, the company behind Pfizer’s vaccine, acquired them for $680 million.

Instadeep’s fairytale ending is every founder’s dream.

But most times, your big swing is a big miss.

90% of startups fail, and success stories like Instadeep are rare.

Last year, many well-funded African startups (like Sendy and 54Gene) closed shop.

While shutdowns can shake market confidence, they’re also a good thing.

Failure helps the ecosystem grow up.

It helps founders learn what doesn’t work in our market.

So instead of being hard on founders when they fail, we could figure out how to fail properly.

What’s a smooth shutdown process like? How do you go down without people losing faith in you?

We looked into Africa’s startup shutdowns and found five gems on how to end a startup.

1. Don’t wait until you have zero in the bank

When you’re flush with cash from investors, you think about how you’ll build the product, acquire customers, and scale into new markets.

Not how you’ll need some of that cash to wind down.

But closing shop is not cheap.

Some startups, like Sendy, end up selling their assets to make ends meet.

Some, like MarketForce, end up in court with suppliers baying for blood.

Then others, like Kenyan agritech iProcure, file for bankruptcy to buy some time to scrape cash together.

But you don’t have to go bankrupt before you shut down.

You can plan for failure

It costs anywhere between $25,000-$75,000 to shut down legally - depending on how big your startup is.

You'll have to:

• Pay out your employees as you lay them off

• Settle debts to avoid getting dragged to court by suppliers

• And cover legal and accounting fees to stay in line with market regulations.

To afford it, track your startup's runway, keep cash stashed away, and don’t wait too long to close up.

When you hit an extended plateau, talk to a legal pro about your shutdown options.

2. What’s hard about layoffs?

Finding talent is a big deal when starting something new.

You convince your team to leave their cushy jobs, or to leave their own startup dreams to join yours.

But when it all falls apart?

You look them in the eye and tell them they boarded the wrong ship.

It’s easier said than done.

When Lazerpay, a Nigerian crypto-payment startup, folded last year, Emmanuel Njoku felt the weight of letting the team go.

In a podcast episode with The Flip, he says:

“I remember I cried. I was like, ‘Oh, my God. I built out a really great team, and to see everyone go was really, really painful.’

How to handle it?

Talk to your team yourself - don't pass it off to someone else.

When laying off his team at Lazerpay, Njoku says:

“I sent these internal letters to everyone on the team, and then I asked people to schedule a one-on-one call with me.”

“If you're a good leader, your team will actually have your back.”

So let your team know what's up.

Tell them why you’re shutting down and what you can afford to send them off with.

And if you can, help them get hired.

After laying off over 1,900 workers, Airbnb set up a platform for ex-employees to share their profiles, resumes, and work samples.

The platform drew in thousands of recruiters and visitors, and many ex-employees landed new jobs.

3. Your co-founder relationship could crumble

Your co-founder is the first person who shares your startup ambition.

But when things are good, you’re never ready for when they go bad.

Last year, the Nigerian fintech Pivo shut down when its co-founders couldn't sort out their differences.

But they’re not the only ones.

65% of startups dip because of co-founder conflicts.

And conflicts thrive when sales are falling off a cliff, money's bleeding out, and investors are bailing.

Sometimes, it ends in a relationship that can’t be fixed.

But your teamwork can outlive your startup

Co-founders disagree on many things when a startup is ending.

Whether to pivot or close up shop entirely. Or how to explain things to the press, investors, or the team.

So first things first - share the decision.

You might have different shares in the company, but let everyone chip in on how you’ll call it quits.

And for new founders, draft a co-founder agreement from the start.

It's a legal document that guides your partnership and covers:

• Who does what when shutting down

• Who owns what you created and what happens to it

• And how to settle disputes or when to bring in a mediator

4. Don’t hide from the media - own your story

Media can do the most. We get it.

When dealing with failure, the last thing you want is a reporter bugging you for their next big story.

And you may feel triggered to react like this:

But here's the thing - you’re a founder.

Success or failure, you are accountable for what happens at your company.

And speaking to the media:

• Builds trust with your customers, investors, and the whole ecosystem

• Gives other founders some solid lessons on what you could’ve done better

• Keeps your reputation intact by stopping any gossip from flying. Or slowing it down.

And in 2024, media does not have to be Tech Safari.

Media can even be a simple blog post, like what Tesh Mbaabu wrote to explain the MarketForce shutdown.

5. Your investors want to help you through this

“Hey, I lit up that $2 million check on fire. And I have nothing to show for it.”

Tough convo. But you need to have it.

Investors who put their money where your mouth was want you to lay it all on the table.

• What went wrong?

• What will happen to their investment?

• And what's next for you?

Two weeks ago, The Peer, a Nigerian API startup that raised $2.1 million in 2022, closed shop.

The founders offered to give back $350,000 to investors.

But their investors were skeptical - and wanted an audit of the company.

Lesson? Be transparent.

You never know when you’ll raise funding again. And who you’ll need on your cap table.

While it may feel like it, failing isn’t the end.

Sometimes, it is the start. And your chances of getting it right next time go up:

• Reid Hoffman failed with Socialnet before building LinkedIn

• While Peter Thiel’s hedge fund lost 90% of its $7 billion assets before co-founding PayPal

So be prepared. Be practical. And keep going.

What did we miss about shutting down?

Reply to this email to let us know.

And that's a wrap!

Did we miss anything? Or just want to say hey? I'd love to hear from you! You can:

• 💸 Invest with the Tech Safari Syndicate

• 🐦 Find me on Twitter

• 💬 Holler on Linkedin

• 💌 Reply to this email

• 🚀 Partner with Tech Safari

• 👨🏾‍💻 Hire with Tech Safari Talent

And if you don't already, make sure to sign up to get this in your inbox next week.

And remember - it just takes just five referrals to join our WhatsApp community 👇🏾

Catch you soon!