According to an internal document, Kenya-based companies’ future SkyGarden, an Amazon-style marketplace for third-party merchants to sell electronics, home products, and other items, is in jeopardy after failing to raise a round of financing.
According to an insider, the startup’s co-founder and CEO, Martin Majlund, handed termination notices to staff earlier this month following a town hall meeting in which he indicated that the company was running out of money and would close on October 16 2022.
- The future of Sky.Garden, is in jeopardy after failing to raise a round of financing.
- CEO Martin Majlund handed termination notices to staff earlier this month indicating that the company was running out of money and would close on October 16 2022
- Sky.Garden raised US$4 million in a Series A round of fundraising last year, bringing its total VC funding to US$5.2 million
Sky.Garden still in talks with investors
However, when approached by TechCrunch, Majlund stated that, despite the startup’s financial difficulties, Sky.Garden is still in talks with investors and potential purchasers to preserve it from bankruptcy.
“Sky.Garden Limited is still solvent, and activities continue.We are in talks with acquirers and potential investors.
However, because we need to be careful about doing things correctly, we decided on September 16 to give our employees 30 days’ notice while we work on our opportunities,” Maljund said, adding that 2022 has been a challenging year for startups/scaleups in general.
VCs in Western economies have been warning of a financing winter, with the speed and size of startup investments slowing significantly in the aftermath of other market falls.
This has been playing out much more in emerging countries like Kenya.
“Rising costs, inflation, the war in Ukraine, and increasing interest rates have made the venture capital environment very difficult, especially for a B2C e-commerce business,” Majlund explained.
“As a result, we’ve been deep in M&A discussions for quite some time. But we are not the only ones harmed by macroeconomic contractions, which have had a detrimental impact on the chronology of these dialogues, leaving us in a predicament described above.” He Continued.
Sky.Garden raised US$4 million in 2021
Sky.Garden raised US$4 million in a Series A round of fundraising last year, bringing its total VC funding to US$5.2 million. Since 2017, the startup has had hundreds of small and medium-sized enterprises sell through its online marketplace. The firm guarantees “end-to-end” order fulfilment and earns an 8% commission on every sale made through its platform.
It’s a concept that was arguably best popularised by Amazon, albeit the e-commerce behemoth’s success in executing it has been partly due to massive economies of scale, which have given it more diversification and allowed it to balance falls in some areas against expansions in others.
Despite the fact that SkyGarden is rich with merchants and customers in Kenya, the company is substantially smaller, with only 46 employees, according to LinkedIn statistics.
The company is a well-known business in areas such as Nairobi, which guarantees 24-hour delivery of goods purchased on-site. However, it is not clear how much revenue the company made or how that figure has changed over time.
“For the past six years, SkyGarden has had a beneficial impact on thousands of small companies, hundreds of thousands of consumers, and hundreds of boda boda drivers.” We are confident that with the appropriate partner, we can maintain this influence in the future,” Majlund stated.
When it comes to e-commerce, even scalability can be elusive, and profitability might take a long time to arrive.
In Kenya, it competes directly with NYSE-listed Jumia, Africa’s largest e-commerce marketplace, which is still not profitable a decade after its start, despite indications of increased e-commerce adoption in Africa.
And while companies like Jumia continue to grow in revenue, customers, and basket value, the reality is that African e-commerce marketplaces are cash-intensive ventures that face numerous challenges, not least those associated with consumers’ and merchants’ reluctance to pay before delivery of products and to do so using payment cards. Most players have had to include cash-on-delivery options, which are inefficient and have their issues.
Because there is no trustworthy national courier service, most e-commerce enterprises have had to establish in-house dispatch teams, which is an expensive endeavour.
All of this has influenced Sky.Garden’s posing the issue of how other smaller firms within the same sector will do in the following months.