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Within the last decade, Africa has witnessed exponential growth in terms of start-up establishment. African youths consistently coming up with creative ideas to tackle indigenous problems in a business format. While they start on a good note, it has become a precedent that these start-ups fail after a few years of establishment. According to Founders Factory Africa, 50% of African start-ups fail within five years. This disturbing statistic makes one wonder what could be the cause. Often times, these shutdowns are blamed on paucity of funds but, facts and figures suggest otherwise.

According to Nairametrics, nine Nigerian start-ups that collectively raised over $70 million within two years shut down in 2023. Amongst them include 54 Gene ($45 million), Pivo Africa ($2.6 million), Lazerpay ($1.1 million) and Zazuu ($2 million). Conspicuous of all, Dash, a Ghanian fintech that raised $86.1 million in five years has also shut down.

While the excuse of inadequate funding is not totally negligible, it is difficult not to question the managerial skills of start-up founders. There have been reports of founders mismanaging raised funds and running their firms in a lackadaisical manner. For instance, African Heroes reported that Prince Boakye Boampong, the founder of Dash, was faced with similar allegations. These allegations ranged from the alleged diversion of about $8 million of the company’s funds, to the payment of exorbitant monthly salaries to the tune of $50,000. The founders of Capiter, a defunct Egyptian E-commerce, were also ensnared in the allegations of misappropriating funds by investors. Ẹran Eyal, the founder of Springleap a South African advertising agency, was accused of absconding with $609,000 from investors by the New York Attorney-General.

The above cases are a pointer to the fact that most founders lack the skill to effectively utilise investors funds after raising it. Confronted with such humongous funds, they flounder it and ultimately lead to a shutdown. What most start-up owners possess are the technological skills to create a problem-solving product but not the soft skills required to run the day-to-day operations of the company. While they are smart in terms of tech skills, they lack the business acumen to run a start-up.

To resolve this, every founder ought to be vetted before being entrusted with investors funds. Cogent questions like whether they have handled huge funds before or whether they have experience in that start-up field ought to be asked and answered adequately.

In addition, start-up owners should be mandated to attain MBA degrees before becoming founders. The benefits of a MBA degree are numerous. For instance, it improves a person’s practical and theoretical knowledge of how businesses operate. It further causes greater awareness of a global market and expands the professional network of an individual.

Also, it is important for start-up founders to acknowledge that because they created a company does not necessarily mean they have to run it. They can choose to just have stocks in the company while they appoint a more efficient person to run the firm.

It is important that African start-up owners acknowledge these faults and address them quickly. Failure to do so will make the African start-up space loose investors confidence and consequently suffer from low funding.

Kindly find my CV attached to the link below:

https://drive.google.com/file/d/162W0SSclYDhmguiEebffcmbwTD_LumXT/view?usp=drivesdk