2024 Startup Graveyard Report: Governance Gaps Contribute to High Failure Rates in Africa’s Startups

Africa’s startup ecosystem is full of innovation, yet many promising ventures fail before realizing their full potential. The 2024 Startup Graveyard Report highlights that 58 percent of startups fail due to financial difficulties, 27 percent due to operational issues, and 17 percent due to regulatory challenges.

A recurring theme in these failures is the lack of robust governance structures, a critical but often neglected factor in the success of startups, the report noted.

Despite the high-risk nature of early-stage startups, many founders shy away from forming formal boards, viewing them as bureaucratic obstacles rather than strategic assets. Without proper governance, many startups deplete their funding by focusing on aggressive growth instead of developing a clear path to profitability.Africa’s regulatory environment is both intricate and ever-changing, yet numerous startups overlook compliance risks. The report outlined how regulatory crackdowns resulted in the closure of fintech startups like LazerPay and BuyCoins Pro. These companies encountered legal hurdles stemming from compliance issues—challenges that could have been avoided with more robust governance frameworks. Omobola Johnson, Senior Partner at TLcom Capital, stressed that governance is not about control but about mitigating risks.

She suggests that a board with expertise in regulatory matters can assist startups in addressing compliance issues before they become critical threats. This proactive strategy can safeguard against costly legal disputes, financial setbacks, and reputational harm.

Although governance failures have led to the downfall of many startups, others have succeeded by adopting structured leadership. The report noted that unicorn startups such as Flutterwave, Moniepoint, and Interswitch have utilized strong governance frameworks to drive sustainable growth.

 

Take, for example, Dash, a Ghanaian fintech startup that raised $85 million and expanded into several African markets. However, poor internal governance led to financial mismanagement, regulatory violations, and ultimately, its downfall.

Similarly, Sendy, a Kenyan logistics startup, faced cash flow issues and operational inefficiencies after expanding beyond its financial capacity. The report suggests that a well-structured board could have provided the necessary oversight to guide more sustainable growth.

 

The report highlighted that these companies have established strong financial controls, diversified their revenue sources, and maintained regulatory compliance, which has helped reduce their exposure to risks. It further pointed out that the misconception that governance is only relevant for large corporations is costing African startups millions. Well-organized boards offer a competitive edge by providing strategic direction, promoting financial discipline, and ensuring adherence to regulations.

As the startup ecosystem in Africa continues to mature, founders must view governance not as a limitation but as a driving force for growth.

“With funding becoming increasingly limited and regulatory oversight intensifying, governance is no longer optional; it is crucial for survival,” the report concluded.

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