Kenya’s end-to-end fulfillment platform that connects manufacturers, distributors and e-commerce businesses directly to warehousing facilities, is shutting down.
The development comes as the logistics service provider considers discussions around an acquisition.
Although much is still left unstated, Sendy co-founder, Meshack Alloys, tells press that, “We are in the middle of an acquisition process. So yes, Sendy is being acquired. We will issue a formal joint statement in two weeks or so time.”
“In the meantime, we are unable to comment on further details at this time,” Meshack noted.
Back in 2015, Don Okoth, alongside Evanson Biwott, Malaika Judd, and Meshack Alloys, joined forces to establish Sendy as a startup offering a logistics platform to make delivery processes simple, transparent, and secure.
The vision was to “provide an easy way for businesses to move goods,” and as further described by the press, the startup grew to be used by thousands of companies leveraging “its platforms and APIs to sell and deliver goods to their consumers.”
But why is it shutting down 8 years later? The team noted that its mission was to empower people and businesses by making it easier to trade.
Analysts wonder if raising capital wasn’t enough guarantee against possible shutdown of business in Africa as Sendy has raised $26.5 million since inception from several investors, including Toyota Tsusho, Atlantica Ventures, VestedWorld, Keppel Capital, Enza Capital, AAICA Investment Pte Ltd, Sunu Capital and Goodwill Investments.
Amongst other challenges, industry analysts noted that Sendy has been grappling with issues of staying afloat following a series of layoffs and business choices that compelled it to discontinue certain product offerings.
In 2022, Sendy laid off 10% of its staff, which Alloys pointed out was a response to the “current realities impacting tech companies globally.”
In October of the same year, the Kenyan startup laid off 54 employees and phased out its supply service.
In February 2023, the company declared its exit from its end-to-end fulfillment offering in Nigeria, a market it had entered two years earlier.
In 2022, the startup secured “bail-out funds” from MOL PLUS, the venture capital arm of Japanese transport company Mitsui O.S.K. Lines, Ltd. (MOL) but it seemed this was not enough to keep its doors open.
Industry leaders privy to the company’s activities disclosed that the startup had been actively exploring alternative measures to fortify its business but has not met with success hence next step of shutting down operations.
Challenges Facing Logistics Startups like Sendy in Africa
The African continent is witnessing a surge in entrepreneurial activity, with startups spanning various industries.
Among these, logistics startups are emerging as key players, aiming to address the unique challenges of moving goods across vast and diverse landscapes.
However, despite their potential, these startups encounter a plethora of challenges that can significantly impede their growth and success.
1. Inadequate Transportation Infrastructure:
One of the most prominent obstacles for logistics startups in Africa is the inadequate transportation infrastructure. Poor roads, limited access to reliable ports, and underdeveloped rail networks can lead to delays, inefficiencies, and increased operational costs. These limitations hinder the smooth movement of goods and can be a major roadblock for startups aiming to provide efficient logistics services.
2. Unreliable Power Supply:
A consistent and reliable power supply is crucial for the smooth operation of logistics operations, including warehouses, distribution centers, and transportation fleets. However, many regions in Africa suffer from frequent power outages and unstable electricity grids, making it challenging for startups to maintain their operations without disruptions.
3. Regulatory and Bureaucratic Challenges:
Navigating complex regulatory environments and bureaucratic procedures can be a significant barrier for logistics startups. Different countries often have their own customs regulations, import/export procedures, and licensing requirements. Navigating these hurdles requires a deep understanding of local regulations, which can slow down operations and increase compliance costs.
4. Limited Access to Funding:
Access to funding remains a critical challenge for startups across the globe, and African logistics startups are no exception. Investors may perceive the logistics sector as high-risk due to infrastructure constraints and unpredictable market conditions. This lack of funding (as the case with most African startups) can hinder the ability of startups to scale their operations, invest in technology, and hire skilled personnel.
5. Last-Mile Delivery Challenges:
The last-mile delivery, often considered the final leg of the supply chain, is particularly challenging in Africa due to its diverse geography and urban-rural divide. Navigating unpaved roads, congested urban areas, and addressing the needs of remote communities can be complex and resource-intensive, impacting delivery efficiency and customer satisfaction.
6. Building Trust with Customers:
Building trust with customers is essential for any business, but it becomes even more critical in the logistics sector. Customers need assurance that their goods will be delivered safely, on time, and in the promised condition. However, concerns about theft, damage, and delays can make it challenging for startups to establish a strong reputation and secure repeat business.
7. Technology Adoption and Integration:
While technology can offer innovative solutions to many logistics challenges, the adoption and integration of technology can be slow in some parts of Africa. Limited digital infrastructure, lack of tech-savvy personnel, and resistance to change can hinder startups from leveraging technologies like tracking systems, route optimization, and warehouse management software.
How Acquisition Can Save Tech Startups like Sendy from Collapsing
In the fast-paced and dynamic world of technology startups, the journey from inception to success is often a rollercoaster ride filled with uncertainties. While some startups manage to thrive and disrupt industries, many others find themselves facing the looming threat of collapse. In such dire circumstances, acquisition can emerge as a lifeline, offering struggling tech startups a chance to survive, evolve, and even flourish.
The Struggles of Tech Startups:
Tech startups are known for their innovative ideas and disruptive potential. However, the road to success is lined with challenges that can easily overwhelm even the most promising ventures. Limited funding, fierce competition, market volatility, and scalability issues are just a few of the hurdles that startups must navigate. As the pressure mounts, some startups find themselves on the brink of collapse, with dwindling resources and uncertain futures.
The Role of Acquisition:
Acquisition, the process by which one company purchases another, can be a strategic move that provides a much-needed lifeline to struggling tech startups. Instead of succumbing to failure, these startups have the opportunity to join forces with a larger, more established company that sees value in their technology, talent, or market positioning. This symbiotic relationship can breathe new life into the startup and set it on a path to recovery.
Benefits of Acquisition for Struggling Startups:
Access to Resources: Startups often face resource constraints that limit their growth potential. An acquiring company can inject much-needed financial resources, infrastructure, and operational support, enabling the struggling startup to scale more effectively.
Market Validation: The fact that a larger company is interested in acquiring the struggling startup can act as a strong vote of confidence. This validation can help rebuild investor and customer trust, as well as attract new opportunities.
Leveraging Expertise: Established companies bring a wealth of experience and industry knowledge to the table. This expertise can help the struggling startup navigate challenges, refine its strategy, and make more informed decisions.
Access to Customers: A larger company’s existing customer base can provide the struggling startup with immediate access to a broader market. This can accelerate growth and revenue generation.
Talent Retention: Acquisition doesn’t just benefit the startup; it can also offer a new lease on life for the startup’s employees. Their skills and knowledge can be retained and integrated into the acquiring company, minimizing job losses and preserving intellectual capital.
Successful Acquisition Stories:
Several tech startups have successfully turned their fortunes around through acquisition. Instagram, for example, faced significant challenges in scaling its platform. When Facebook acquired Instagram in 2012, it provided the resources and support needed to accelerate Instagram’s growth into the social media giant it is today.
Similarly, struggling startups like YouTube and Waze found new life after being acquired by Google. These acquisitions allowed the startups to tap into Google’s resources, user base, and technical infrastructure, enabling them to flourish.
As Sendy done the correct thing?
The acquisition can indeed save tech startups from collapsing, transforming them from struggling ventures into thriving entities. While the decision to be acquired is not to be taken lightly, it can offer a chance at survival and growth that might not be achievable through independent efforts alone. By leveraging the resources, expertise, and market reach of an acquiring company, Sendy can rewrite its narratives and write a new chapter of success in the ever-evolving logistics industry.