Monday, 05 September 2022

Partner(s)

Good morning!

Dennis here,

At the start of the year when layoffs started in the West, funding for the African tech ecosystem soared. At $3.1 billion, the space saw its best Q2 this year. Then everything stopped.

Even as I, a tech newsletter writer scavenge the internet for a piece of good news to begin this week, the time for the ecosystem to gather at the public square and for the first time, maybe, honestly, ask each other if we grew too fast, has come.

Do startups really need over 400 staff to operate? If founders had taken what would obviously be lesser money from local investors and focused on local integration and faster routes to monetisation, rather than foreign funds and global expansion and longer routes to monetisation, will the industry be bleeding staff like this, as Silicon Valley's backing comes to a halt?

News broke over the weekend that Kuda has also laid off staff after it has raised over $90 million in investors' money in four years. Alerzo also has now let go of over 200 staff. It is sad to say that they will still be more layoffs, some might have happened already but didn't make it to the news cycle.

Even if founders choose to source funds locally — the die is cast already; massive operations in Kenya and Ghana and God knows where — they will hardly succeed for many reasons.

But most notably because local banks will not be so quick to dole out millions of dollars to a fintech that is barely three years old and is fully remote with no physical asset and is barely making any money.

Below are the tech stories and news you need to know to start your day, carefully curated by Technext.

Summary of the news

Hackers caused a massive traffic jam in Moscow using a ride-hailing app
Kuda has also laid off employees
The world had 216 new unicorns in H1 2022 and none is from Africa
Alerzo layoff over 200 staff

Hackers caused a massive traffic jam in Moscow using a ride-hailing app

Hackers caused a major traffic jam in Moscow after exploiting the Russian ride-hailing app, Yandex Taxi, to summon dozens of taxis to the same location at the same time. The attack occurred on September 1st and had traffic heading towards Kutuzovsky Prospect — an already busy boulevard — stuck at a standstill, The Verge reports.

A video showing lines of taxis seemingly trying to get to the same destination was shared widely on Twitter and Reddit on Thursday. While Moscow is known for its heavy traffic — it ranked number two as the world’s most congested city in the world last year — this incident wasn’t related to the capital city’s typical traffic patterns.

“On the morning of September 1, Yandex. Taxi encountered an attempt by attackers to disrupt the service — several dozen drivers received bulk orders to the Fili region,” Yandex spokesperson Polina Pestova said in a statement to The Verge. The ride-hailing service, which is owned by the Russian internet giant, Yandex, added that the jam lasted less than an hour and that its “algorithm for detecting and preventing such attacks has already been improved to prevent similar incidents in the future.”

Yandex has yet to confirm who carried out the attack, but the hacktivist group Anonymous, claimed responsibility for the jam on Twitter.

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Nigerian digital bank Kuda is the latest African startup to lay off employees

Kuda, the challenger bank based in Nigeria and the U.K., has joined the ranks of tech companies in Africa that are pruning their workforce.

The news of the layoffs, which was first disclosed to TechCrunch by sources, was confirmed by Kuda via email, saying it laid off less than 5% of its 450-strong workforce, or about 23 people, TechCrunch reports.

“Kuda is currently making some strategic changes to serve its customers better and continue to make financial services more accessible, affordable and rewarding to every African,” said the four-year-old company, citing reasons for the layoffs.

The company’s numbers are small compared to other layoffs that have taken place within Africa’s tech ecosystem over the past few months, especially among startups that have raised vast sums of venture capital within the last year or two; for instance, Swvl laid off 400; Wave, approximately 300; 54gene, 95; and Vezeeta, 50.

However, the event speaks to varied efforts startups — including soonicorns and unicorns — are making. It’s not entirely a surprise, in Kuda’s case, even though the company went on a hiring spree for designers in July.

When Kuda held a town hall meeting last month, cutting down seemingly redundant roles and dismissing nonperforming staff to reduce costs and extending runway were topics of conversation in light of current macroeconomic trends, according to sources.

The world had 216 new unicorns in H1 2022 and none is from Africa

A report on startup ecosystems worldwide has indicated that a whopping 540 companies achieved unicorn status in 2021. This was up from the total of 150 in 2020, with 113 ecosystems producing at least one company valued at more than $1 billion, Technext reports.

The report by Startup Genome and the Global Entrepreneurship Network found that the average value of Series A funding rounds globally has tripled to more than $18 million since 2012 with tech companies have been leading the way with 2.3 times more growth on average than non-tech start-ups since the pandemic.

At the beginning of 2021, 66 new startups reached the unicorn mark, according to Eqvista. By the end of 2021, Startup Genome reports the number to have risen to 540.

Pitchbook research cited in the report found that the growth in unicorns is due, among other factors, to new, non-dilutive funding sources, to which founders don’t have to give up equity. That can be more appealing than traditional VC funding.

Alerzo employee layoffs

Over the last two weeks, more than six people with knowledge of Alerzo’s business spoke to the tech newsletter Notadeepdive, all of them spoke on the condition of anonymity for fear of reprisals and described an atmosphere of fear and uncertainty as the startup continues mass layoffs.

Several employees told Notadeepdive that over 200 people have now been fired since May 2022, with the newest round of layoffs happening a few weeks ago.

“Over 100 people were fired in May. Most of those who were affected were ground level officers like logistics and loading officers who work Monday to Saturday from 7 am to 7 pm to ensure they meet targets,” one current employee told Notadeepdive. “At that time, they were fired for performance reasons.”

All Alerzo employees who spoke to Notadeepdive say that these layoffs for performance were excuses for a company that sometimes overestimates the number of workers it needs.

One person told Notadeepdive that, “At Alerzo, hiring happens every time we expand. But when we expand and there is low demand, the newly hired staff are then at risk. So if we expand to the South-South and hire a bunch of staff but business demand is low, they’ll get laid off even if it’s not the fault of the staff.”

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