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REALITY CHECK | ‘Venture Capital is Not For Great Companies, its For Excellent Companies’ – Lessons from CEO, MarketForce – BitKE

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Kenyan startup, MarketForce, has closed down its B2B e-commerce platform, RejaReja, after failing to adequately scale it given the global ‘funding winter,’ and has instead pivoted to a focus on social commerce with a new joint venture called Chpter.

Established in 2018 by Tesh Mbaabu and Mesongo Sibuti, MarketForce initially focused on developing sales force automation software. However, the company quickly shifted its focus to launch RejaReja, a B2B retail marketplace catering to informal merchants in Africa. Through RejaReja, merchants could conveniently source, order, and digitally pay for inventory, among other services.

Following this development, Mbaabu, one of Kenya’s successful founders, admitted to having learnt some important lessons, in particular, when it comes to raising venture capital.

 

“Venture capital is not for good, or even great, companies. It’s for companies that are so excellent that they produce outsized returns at the right time in the right market. We got this completely wrong, and it hurt us when the committed capital didn’t fully come through,” said Mbaabu.

 

The Rejareja product started very well following a $200K injection of seed capital by boostrapping from friends, family and angels, and earned them a seat in Y Combinator, the most prestigious startup accelerator in the world, in the summer of 2020.

Following YC, Rejareja grew rapidly enabling the startup raised an additional $2M for product development and geographic expansion in 2021, followed by a significant Series A investment in 2022.

 

“In just three years, we expanded our footprint to 21 cities across five countries – Kenya, Nigeria, Uganda, Tanzania, and Rwanda – creating over 800 jobs and serving over 270,000 merchants. During that period, we have delivered just shy of one million orders, amounting to over $160 million in gross transaction volume on RejaReja alone,” Mbaabu said.

 

With that said, MarketForce, despite its ambitions for aggressive expansion, would find itself navigating unfamiliar territory without anticipating the onset of the ‘funding winter,’ as noted by Mbaabu. This unforeseen challenge significantly impacted the company’s plans, with a substantial portion of the expected Series A funding failing to materialize.

Investors withdrew their support, citing global economic conditions as the primary reason.

 

“But in our bid to scale quickly, we did not realise that we were treading in new territory or anticipate the ‘funding winter’ that would strike later that year.

Now we know that every dollar a startup can raise is a gift. It should never be the life-blood of the business. The current movement in the tech ecosystem towards profitability is a beautiful reminder of that lesson. That means obsessing over customer dollars and using investor dollars as additional fuel. We lost sight of this for a time, and that is a mistake we will never make again.”

 

According to Tesh, the B2B distribution business that was RejaReja became unsustainable for a few reasons:

  • Firstly, the retail FMCG market has razor-thin margins, which means that at a unit level, they struggled with profitability
  • The segment is also highly price elastic, which means the price wars are consistent. That’s always a race to the bottom

 

After immense efforts and ‘trying every possible tweak’ to make the business model sustainable, including downsizing the business to extend the runway for as long as possible, they concluded that it was no longer feasible to keep RejaReja operational.

 

“We’ve always known that building a high-growth startup would be hard.

Our ecosystem is still very young, and we need more failures, not less, because that’s how we learn, grow and emerge stronger.

Failing means we are pushing the limits and learning lessons that help us discover what truly works in the African context. We need to get better at acknowledging business failure, embracing it, analyzing it, and applying the learned lessons to future endeavours. Mesongo and I are coming into the next chapter, having graduated from a multi-million dollar course in building for the continent- the school fees we have had to pay.

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Speaking about this has been an exercise in healing, but we continue to strongly believe that the only way we lose is if we don’t get back up and try again.”

 

From a personal standpoint, Tesh says:

“In no way do we discount the mistakes we made as we built and the ways we could have thought differently, and communicated faster and clearer about the things that weren’t working.

It hurts that those mistakes all had such high financial and emotional costs for people who had bought the dream and made sacrifices to give the business a fighting chance.

Those are the realities that make such endings incredibly difficult.”

 

 

 

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