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SafeBoda's Nigerian exit is not what it looks like
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SafeBoda’s Nigerian exit
The first time I ever traveled to cover a tech story was in 2020, and it was for the launch of SafeBoda. The Ugandan startup entered the Nigerian market in May 2019 and made headlines for its cautious approach. At the time, ORide, MAX, and a few other bike-hailing startups were already securing their foothold in the Lagos market. But there were already signs and rumors of a government ban so SafeBoda made a beeline for Ibadan.
It wasn’t a popular decision at the time, and if you’ve been to Ibadan, the first thing you’re likely to notice is that okadas are everywhere and unlike Lagos, they’re relatively cheap. Without the congestion of Lagos or the high prices, many observers asked if SafeBoda would make any money with such razor-thin margins. Yet, weeks after they launched in Ibadan, the Lagos state government banned okadas–basically, SafeBoda won round 1.
I talked to the SafeBoda team a fair bit during that time, and they often shared news of their milestones: their first 1 million trips, their organic growth without spending any money on marketing, and their plans to get to 5 million trips within two years. They even experimented with a delivery service that saw decent uptake.
At some point, it looked like Ibadan would become the next stage for the competitive bike-hailing wars. ORide also launched in the city with their popular strategy of free rides, while MAX also launched, cranking up competition to new levels- yet in the end, only SafeBoda was still in the Ibadan market by the end of 2021. The other players had pivoted or focused on other parts of their business. Although SafeBoda outlasted everyone else, several sources told me last week that it was calling it quits in the Nigerian market.
Was SafeBoda’s SafeCar a bad bet?
In June 2021, the company’s country manager for Nigeria, Babajide Durosola, resigned having achieved 1.5 million trips in one year and adding 5,000 riders to the company. In December 2021, SafeBoda was one of the beneficiaries of the $50m Africa Investment Fund by Google. It seemed like the only place the company could go from there was up.
But several sources close to the situation described a lack of clarity and strategic focus at the company, culminating in the eventual decision to close its operations in Nigeria. Months after receiving funding, the company decided to expand into the car-hailing space, a contested space in Africa, with Uber and Bolt emerging as market leaders, and outliers like In-driver and Yango clawing some share for themselves.
In Uganda, Uber is the market leader in the cab-hailing space, and there’s no doubt that trying to unseat the market leader will cost $$$ in marketing and other freebies to attract drivers and customers. So one theory is that SafeBoda’s entry into the car-hailing space has not gone as planned and that the company spent money on that side of the business, worsening its cash burn. Yet, it was not only cab-hailing that had SafeBoda’s attention; in March, it launched a payments service, after receiving an NPS license from the Bank Of Uganda. These new directions necessitated hiring without immediate business growth.
Did new funding cause SafeBoda to close its Nigerian operations?
A common theme we’ve seen in 2022 is startups admitting that they overhired in 2021 and lost their heads just a little with overly optimistic projections about the future. So it’s possible to theorize that SafeBoda increased its burn rate pursuing these new directions and soon needed money.
According to this TechCabal article, the company recently secured funding from Yamaha Motor Company and existing investors like Unbound, Allianz X, and JAM Fund. This points to the possibility that in raising new funding, investors may have asked the company to rein in its spending. We’ve seen this before, as TechCrunch’s reporting on 54Gene’s valuation cut shows how investors can wield their power in situations like this. It may have driven the decision to trim the Nigerian team a few months ago, yet in the end, even that was not enough, as the company has now closed its Nigerian operations.
But two sources in the know shared that SafeBoda’s core bike-hailing business in Nigeria was cashflow positive and continued to show strong growth. It puts the decision to close the Nigerian business in another light. Nevertheless, the company said in a statement, “this new financing will help it deepen its core transportation offering “while continuing to build its payments and financial services in Uganda.”
African startups are weathering the funding storm with acquisitions
A new report from Africa’s foremost digital economy consultancy, TechCabal Insights has revealed that acquisitions have become more frequent
in Africa’s tech ecosystem, showing signs of a maturing market. According to the report, 2021 saw 32 acquisition deals on the continent. At the end of Q3 2022, there were about 43 acquisition deals, signaling a consolidation trend.
After two years of continuous growth in VC investment, funding announcements have hit a plateau. Startups have resorted to cutting costs to extend their runway, and acquisition deals have become necessary for survival, particularly with startups operating in the same market. The number of acquisitions between startups operating in the same market increased from 31% in Q2 to 52% in Q3 2022.
The State of Tech in Africa Report compiled by TechCabal Insights, also found that the average seed ticket size remained stable at $2.5M in Q2 and $2.7M in Q3.
What I’ve been reading
We keep talking about how business leaders were wrong about their forecasts for this year, so this article on how nobody knows anything is perfect.
There are tons of books on how to get wealthy, but this essay argues that staying wealthy requires frugality and paranoia
This cover story by Native Mag on Asake is the stuff all cover stories should aspire to.
This article speaks on the Nigerians who lost money to the FTX collapse
Edited by: Jimi Osheidu