E-commerce firm Copia is latest major African startup to be troubled

Copia Global, the Kenya-based online retailer, announced Friday it was entering administration after failing to raise new funding.

In doing so, the B2C e-commerce platform set up a decade ago to enable customers in remote areas order goods and receive deliveries through its network of agents, became the latest major African startup to get its fingers burned, or is about to.

Copia Global aimed to serve middle- and low-income consumers in Africa, particularly in rural areas, by providing access to a diverse range of goods and services. By November 2023, the company had raised over a $100 million in eight rounds from investors such as Zebu Investment Partners, the U.S. International Development Finance Corporation, Koa Labs, Lightrock, German development finance institution DEG, and Perivoli Innovations.

In its most recent financing round in December 2023, Copia raised $20 million from Enza Capital, LGT, Goodwell Investments, and other investors in a Series C extension round.

In recent weeks, however, the outlook for Copia Global has been bleak. In a leaked May 16 note to staff, CEO Tim Steel revealed that the company had been facing financial difficulties for some time and attempts to secure additional funding had been unsuccessful. Consequently, the company was contemplating either a restructuring or a shutdown.

Both options would have severe consequences for the workforce. A restructuring would result in approximately 1,060 employees being laid off. The letter served as the legally required one-month notice to all staff, indicating that their employment might be terminated.

Enters Administration

On Friday, Copia Global announced that it had entered administration.

When a company enters into administration, it means that the business is facing serious financial difficulties and can no longer pay its debts. An independent administrator, usually an accountant or financial expert, is appointed to take control of the company. The administrator’s job is to try to rescue the company, if possible, or to manage its assets to pay off as much of the debt as they can.

Administration is a way to try to save a struggling company or, if that’s not possible, to make sure its remaining assets are used to pay back creditors in an orderly manner. It is often a last resort to avoid liquidation, where the company would be completely shut down and its assets sold off.

Copia Global appointed Makenzi Muthusi and Julius Ngonga of KPMG, an audit and advisory firm, to manage the administration process, according to a statement quoted by Kenyan media.

“Copia Global, the parent company of Copia Kenya, was unable to attract capital on terms that were amenable to all existing stakeholders, funders, and investors. Copia Global is now winding down, leaving the Copia Kenya business in a new position to raise capital directly,” it said in a statement quoted by TechCabal.

“In light of our persistent financial challenges and despite our best efforts to explore avenues for additional funding, we find ourselves compelled to undertake a comprehensive organizational restructuring to ensure the sustainability of our operations, or even consider the possibility of shutting down.”

The directors of the company will no longer have any power over the affairs and business of the company, and the administrators’ actions without personal liability.

“Any party having claims against the company should submit their claims in writing with relevant supporting documentation to the joints to the joints administrators before 23rd June 2024 for consideration,” the statement said.

Declining Funding

Copia is only the latest major African startup to face distress amid a decline in investments across the continent. At least 15 high-profile African start-ups closed in 2023 as macroeconomic conditions worsened and venture capital funding decreased.

In Kenya, Copia joins a growing list of well-funded ventures that have shut down after failing to secure new capital, such as Wefarm, an agritech startup connecting farmers with farm input distributors, and Zumi, a B2B platform linking retailers to suppliers. Others like Sendy and iProcure are under administration, while Twiga Foods and Marketforce are struggling, hoping to regain investor confidence.

Copia, along with Twiga Foods ($186 million), is one of Kenya’s most funded e-commerce platforms. The capital markets environment has been challenging over the past two years, with a significant reduction in capital flowing into Africa, particularly in the e-commerce sector.

According to Partech, from 2022 to 2023, African venture capital decreased by 46%, the number of participating investors dropped by 50%, and funding in the e-commerce sector fell by 53%.

The amount of funding raised by African startups fell by 31% to about $4.5 billion, down from $6.5 billion in 2022, according to the African Venture Capital Association.

Plummeting funding is just one of many challenges faced by companies like Copia attempting to replicate an Amazon-like e-commerce model in Africa’s peculiar tbusiness environment.

There is the issue of low purchasing power and the reluctance or inability of many low to middle-income consumers to buy from online stores.

“Why should I wait for a plastic Karai to be delivered to me when I can buy Kwa Njoro and get it immediately I ask?” asked one Kenyan user on LinkedIn.

There is also the heavy-handed approach that sees firms backed with huge funds prefer the “go big” approach in an attempt to grab market share, instead of building lean.

“The ‘go big or go home’ strategy that ‘burns’ capital to grab market share is a model that fails far more often than it succeeds,” said “Luni” Libes, a fund manager. “And yet that is the investment model that attracts the vast majority of the investment capital.”

Lower Burn Rate

Copia was founded by Tracey Turner and Jonathan Lewis in 2013. Signs of the business straining began to show in 2023. At its peak, the company had 1,800 employees and a network of 50,000 agents in Kenya and Uganda.

In July 2023, Copia cut its operations and laid off 350 staff. Earlier in the year, it had reduced its headcount by 50 employees in an effort to keep labor costs down while aiming for profitability.

Copia also closed its Uganda base, barely two years after establishing operations in the country, and rolled back its ambitious expansion plans that included entering Nigeria, Ghana, South Africa, and Mozambique.

Copia said under the mandate of the administrator, the Copia Kenya management team will implement a plan “with a lower burn rate, an accelerated path to profitability and a focus on the increasingly digital consumer.”