What causing massive lay offs

Kenya’s Tech Startups: What’s Causing the Layoffs?

Recently, Copia Global, a major e-commerce platform in Nairobi, announced that it might lay off over 1,000 employees.

This is just one example of the troubles facing many tech startups in Kenya, especially those focused on last-mile delivery and the agri-food sector.

Over the past two years, several of these companies have faced serious challenges, changed direction, or shut down completely.

Sendy, which raised $26.5 million from investors like Toyota Tsusho Group and Atlantica Ventures VC Fund, has closed its operations.

The company struggled with sustainability, financial issues, and market fluctuations.

Twiga Foods raised $160 million but announced last August that it would lay off a third of its workforce to cut costs by 40%.

The CEO blamed a lack of available funding. Since then, the founders have stepped back from running the company.

Wasoko, valued at $501 million in late 2022 after securing a $125 million investment, also faced problems.

They disclosed that they only received $113 million of the total funding.

In December 2023, Wasoko announced a merger with the Egyptian e-commerce platform MaxAB.

MarketForce, another local e-commerce startup, recently shut down its B2B distribution business RejaReja, citing very thin profit margins that made it difficult to remain profitable.

The big question is why, despite these startups raising over $380 million, they have yet to be able to outcompete traditional informal traders.

These traders, who dominate the retail trade in goods like foodstuffs, seem unaffected by the influx of venture capital and new technologies.

Read: Full list of genetically modified GM crops in the market

The informal sector is deeply rooted in local communities and has proven resilient and adaptable.

These traders have a strong understanding of local markets, personal customer relationships, and flexible business practices that often outperform the structured approaches of tech startups.

For Kenya’s tech startups to succeed, they need to work with the informal sector rather than trying to replace it.

By understanding and leveraging the strengths of these local traders, tech companies can find a path to sustainable growth and success.

Mkulima Young is an online marketplace for farmers developed by a Farmer for farmers.

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