It’s no secret that most startups in Kenya fail. The average startup failure rate is 75%, and many of those who go through the process only become aware of this after they’ve invested a lot of time and money into the project. Failure is most common for startups during years two through five, with 70 per cent of the start-ups falling into this category across all industries.
Kune Foods, Notify Logistics, WeFarm, BRCK, Sendy and Sky-Garden have shut down either in full or part of their business in quick succession in just four months to October. Most of this startups have been in business for less than 5 years.
As a startup, you’re going to face a lot of challenges. You might have to battle a bad economy or compete with larger companies that have more money and resources. You might have trouble finding customers or figuring out what they want. You might just have trouble getting your product right.
The fact that most startups fail is pretty well-known. According to Crunchbase, the failure rate for venture-backed companies is around 75%, and that’s not even counting the number of businesses that never get funding in the first place. Kenya has a very unique business environment and this contributes a lot on whether or not a new business will survive.
Why Startups In Kenya Are Failing And The Solutions For These
So why do so many new businesses fail? It’s a question that gets asked a lot, and there are lots of different answers, but it all boils down to one thing: founders who don’t know what they’re doing. And while it might seem like there are lots of ways to avoid this fate, at the end of the day, your best bet is just to find someone who has already been through it before and knows how to avoid those common pitfalls.
Here are common reasons why Startups in Kenya Fail to see their 3rd year;
Lack Of Funding
The most common reason startups fail in Kenya is a lack of funding. When you’re trying to get your company off the ground, you need money to pay for things like office space, computers, and supplies. If you don’t have enough funding to keep your business afloat, then it’s going to be very difficult for your startup to grow.
Financing models in Kenya tend not to be suitable for financing start-up companies, as the available funds are often insufficient.
“We currently do not have suitable financing model. Majorly the only source of financing that can be able to help you a lot with value is banks because you can go get a long term loan, but with that lacking you have to rely on either your saving or profit, chama sacco etc or even mobile credit but you see the nature of those kind of financing is they are small ticket size” Victor Ogolla, the Managing Director Viffa Consults stated.
So, how do you get funding for your startup? You can try asking friends and family for help, but this isn’t always as easy as it sounds. If you’ve already exhausted all of your personal connections and still haven’t found the money you need from them, then there are other options available:
Government Grants: These grants are given out by organizations like The World Bank or The United Nations Development Program (UNDP). They usually require that applicants have some sort of social mission behind their business idea—for example, creating jobs for people with disabilities or giving back to the community through charitable donations or volunteering time at local schools.
These types of grants often require extensive paperwork before they’ll even consider giving out any money; however, once approved they will typically give out millions of shillings per year.
Crowdfunding: Crowdfunding is a type of fundraising that uses the power of the crowd to help entrepreneurs get their business off the ground. Entrepreneurs create a profile on a crowdfunding platform and set a fundraising goal for their business. They then pitch their idea to the public, who can make small donations to help them reach that goal. The most popular crowdfunding platforms are Kickstarter and GoFundMe; however, there are many others out there to choose from.
Crowdfunding is a great way to raise money for your business, but it’s not without its drawbacks. You have to be prepared to spend a lot of time pitching your idea and getting the word out there about what you’re doing; however, if you can manage that then crowdfunding could be a great way to get some extra cash in your pocket.
Loans: Loans are another way to get money for your business. You can go through a bank or other financial institution to get a loan, but this option is usually only available for larger businesses that have been around for some time and have a proven track record of success. If you don’t fit into this category then you may need to look elsewhere when it comes time to get your hands on some cash.
Unique Business Environment
One of the things you also notice with Kenyans, a majority of business in Kenya are dealing in wholesale retail, meaning that a lot of us buy to resale. There is very little emphasis on manufacturing, agriculture etc so market becomes a real problem, because we are competing for the same market.
Providing Solutions That Do Not Meet The market Demand
Most startups fail because they provide solutions that do not meet the current market demand.
This is because most startups are not aware of what their target market wants and how best to serve them. They could be offering a product or service that is already available in the market and therefore cannot offer anything unique to the customer.
Sometimes, even if your startup has something unique to offer, it can still fail because you are targeting an audience that does not have any need for what you are selling.
According to research, the most common cause of startup failure is not providing solutions that meet the current market demand. This is not a problem unique to Kenya. It is a common problem across all countries in Africa and the world.
In Kenya, there is a lot of competition for startups that are trying to bring about innovation. In order for your startup to stand out, it needs to have a product or service that solves a problem or fulfills a need in the market place.
A good example of this was when Uber came into Kenya with its innovative ride-sharing service. They took over the market quickly because they were offering something that customers needed: affordable transportation options.
To avoid this, you should conduct market research before launching your startup so as to determine whether your product or service will be in demand by potential customers and if yes then how many people might buy it?
Long Turnaround Period
The biggest reason why most startups in Kenya fail is the long turnaround period. Most startups are created by individuals who want to make a positive impact on their communities and make some money while they’re at it. The problem is that most startups take a very long time to start making money, and when your income dries up, so does your motivation.
The best way to avoid this problem is to set goals that you know are realistic for your business and then stick to them. If you find yourself frustrated with how long it’s taking, step back and look at why. Maybe there’s something that needs fixing in your company culture or strategy. Maybe you’re not communicating well with your team members or customers—or maybe you need more resources. Whatever the case may be, remember that it takes time and perseverance to build something great.
Try to find a way to earn an income from your startup as soon as possible. If you can’t do this yet, start looking for ways to get a steady paycheck from somewhere else so that you can keep going with your business idea until it starts making money.
Other factors that are a big contributor include;
The lack of a business plan
A lot of people think they can start a business with nothing more than an idea and some passion. They’re wrong. A business plan is your roadmap to success, and without it, your chances of failure are much higher. It’ll help you identify your market, figure out what steps you need to take to reach it, and give you a way to measure whether or not you’re making progress along the way.
In Kenya, this is especially harmful because there are so many people who want to start their own companies, but don’t know how to do it. Without a proper business plan, they may not be able to convince investors that their idea is sound enough for them to invest in it.
A business plan can help you define your goals and measure your progress towards achieving them. It also helps you determine whether or not your startup will be successful.
Takeaway: Startups can avoid failure with a well-thought out plan.
Expecting an Overnight Success
Startups are hard. They require a lot of dedication and perseverance, and they don’t always pay off right away. It’s easy to feel discouraged when you’ve been working on your business for months or years and you still haven’t made any money, but that’s just part of being an entrepreneur.
You need to be patient with yourself and your business if you want it to succeed. If you’re looking for an instant payoff, then maybe entrepreneurship isn’t the right path for you. But if you’re willing to take the long view, then maybe it is.
When you’re starting a business, it’s easy to get caught up in the excitement of the big idea—but it’s important not to get too far ahead of yourself. You need to be realistic about how long it will take for your business to take off and how much time and energy you’ll need to devote toward making that happen. If you have unrealistic expectations about how fast your startup will grow, it’s easy for disappointment or frustration to set in when things don’t move as quickly as you’d hoped.
Many entrepreneurs start a business with the best of intentions, but they don’t realize that marketing is just as important as creating a product or service.
It’s not enough to have a great product. You have to get the word out about it. This is where most startups go wrong—they don’t have a plan for marketing their brand or product, and they don’t know how to reach their target audience.
Marketing doesn’t just mean advertising. It means creating an identity for your brand, identifying your target audience, researching ways to reach them, creating content that speaks to them, and getting that content in front of them at the right time.
Whether you’re selling something online or offline, you need to be able to tell people about it—and tell them in a way that makes them want to buy it. You also need to be able to persuade people who are interested in what you’re offering that they should choose your product instead of anyone else’s.
If you want your business to succeed, you need to make sure that every aspect of your marketing strategy is working together towards the same goal: getting more customers.
Takeaway: Good marketing and sales technique makes a good startup business.
Trying to grow too big too quickly
The problem is that a lot of people think that being successful is all about being big, but it’s actually the opposite: you need to start small and grow slowly. If you’re trying to compete with other companies in your industry and you’re not at least three times bigger than them, then you won’t have a chance.
It’s also important to remember that startups can be started by anyone—you don’t need any special qualifications or experience! You just need a good idea, passion for what you do, and some hard work.
It’s important to remember that your business is a living and breathing thing that needs care and attention if it’s going to thrive. The key here is to find the right balance between growing your company and maintaining its health.
If you’re thinking about expanding into new markets right now, consider taking things slow and making sure your business is strong enough to support this growth before diving in headfirst.
One main reason for this is that entrepreneurs are often technically skilled and have great ideas, but they lack the ability to manage their teams or their businesses.
This can be due to a lack of experience, or it may be because they are too focused on the technical side of things and don’t realize that there’s more to being an entrepreneur than just coming up with an idea and building it. The most successful startups are those who have founders who know how to delegate tasks and motivate others, as well as set clear goals for themselves and their team.
Not having the right team
If you’re thinking about starting a business, it’s important to build your team with people who are aligned with your vision and values. Don’t be afraid to ask questions about their past experience, and make sure that it matches up with what you’re looking for.
You also need to have a clear understanding of what each member of your team brings to the table. Every person on your team should have a specific role or set of tasks that they are responsible for completing, whether it’s sales or marketing or accounting or customer support. You can’t expect everyone to be an expert at everything, that’s why you need a team.
Takeaway: Startups sound easy, but they aren’t. A lot can go wrong if you don’t have a plan.
How to build a stable and lasting Startup
Startup is a process of creating a new business or company. It is not easy to start and run a successful startup. You need to work hard for it, but it will be worth it. Here are the tips for building a stable and lasting startup:
1. Plan and research before doing anything else – A good plan will help you in making your startup successful. Researching about the market and customers can give you an idea about the products and services that are in demand, so that you can focus on those things only. It also helps you in finding out what kind of people your product/service attracts, so that you can target them accordingly.
2. Find the right partners – Finding the right partners is very important for any business, especially for startups because they have limited resources and capitalization. They need someone who has experience with similar businesses, or someone who knows how to make money from scratch with little capitalization.
3. Build a strong team – Having a strong team is important because they will help you reach your end goal quickly and efficiently, while enjoying their jobs as well as learning new skills along the way.
4. Build a solid marketing strategies and techniques -You need to have a solid marketing strategy that will help you grow your business. You can build your own, or hire an experienced professional who has done this before. This is probably one of the most important things you can do. You need to find ways to reach your target audience and make them want to buy from you.
5. Be consistent – One of the best ways to be successful with anything in life is by being consistent, whether it’s working out or building a business. You need to consistently work on your business, and you need to consistently network with people who may be able to help you grow. The more consistent you are, the faster you will succeed.
6. Learn as much as possible – You can’t expect to be successful if you don’t educate yourself about what it takes. The more you know about your business, the better chance you have of being successful. You need to learn as much as possible about your industry and how it works. Be ready to adapt with the current changes on the market to stay afloat.
New Businesses need to work on research and marketing along with managing their money to ensure success. If you’re able to do this, your chances of running a successful business will increase.