Introduction
Nigeria’s startup ecosystem is buzzing with innovation, drawing billions in investments and spotlighting success stories like Flutterwave and Paystack. Various estimates suggest that about 60% of Nigerian startups fail within five years. According to BusinessDay Nigeria, Nigeria’s startup failure rate was estimated at 61.07%, making it the highest among Africa’s top three startup ecosystems. This high failure rate underscores the reality that failed startups in Nigeria are far from rare – so how can Nigerian entrepreneurs and investors avoid the pitfalls that sank once-promising ventures like 54Gene or Lazerpay?
Despite these challenges, some startups thrive while others fail. What separates success from collapse? In this article, we’ll explore ten Failed Nigerian Startups, uncover the reasons behind their downfall, and highlight key lessons every entrepreneur should know.
📌 Looking for more insights on the Nigeria Startup Act?
- Nigeria Startup Act: Key Benefits, Funding & How to Register
- The Essential Nigeria Startup Act for Entrepreneurs and Investors
I.) Quick Snapshot: 10 Notable Failed Nigerian Startups
Below is a summary table of ten failed startups in Nigeria that shut down or drastically pivoted. We’ll explore each one in detail further down.
| Startup | Founded | Closed/Pivoted | Primary Focus | Key Reason for Failure |
|---|---|---|---|---|
| 54Gene | 2019 | 2023 | Genetic Research | Overexpansion, poor revenue model |
| Lazerpay | 2021 | 2023 | Crypto Payments | Crypto crash, no diversification |
| Mocality | 2008 | 2013 | Mobile Business Directory | Google scraping customer data (TechCabal) |
| DealFish | 2011 | 2018 (OLX Exit) | Classified Ads | Overwhelmed by Google, Facebook |
| OkadaBooks | 2013 | 2023 | E-Publishing | Forex spikes, inflation hurting readers |
| Efritin | 2015 | 2017 | Classified Ads | High data costs, poor adoption |
| Easy Taxi | 2013 | 2016 (Closed) | Ride-Hailing | Missed local payment preferences |
| Yarnable | 2011 | 2014 | Social Networking | Cloned Twitter, lacked uniqueness |
| Hytch | 2023 | 2023 | Logistics | Fuel cost spikes, poor road infrastructure |
| Gokada | 2018 | 2020 (Pivoted) | Bike-Hailing/Logistics | Lagos okada ban, sudden policy shift |
II.) Why Do So Many Fail in a “Booming” Nigerian Startup Ecosystem?
Starting a company anywhere is tough, but Nigeria can be especially unforgiving. Here’s why:
- Heavy Reliance on VC Funding in Nigeria
Many startups burn through initial capital without establishing real revenue streams. - Forex Instability & Inflation
Importing tech or paying for foreign SaaS becomes pricier, eating into margins. - Local Consumer Behaviors
Data costs, cash-based culture, and inconsistent infrastructure can derail “copycat” models. - Competition from Tech Giants
Google, Facebook, Amazon—if you’re not uniquely local, they can crush you. - Regulatory U-Turns & Lagos Startup Failures
One unexpected government ban (like the Lagos motorcycle ban) can kill your startup overnight.
Interestingly, Kenya’s startup failure rate is estimated at about 45%, lower than Nigeria’s 60%, partly due to more consistent government support and investor confidence. These figures help explain the challenges that drive so many Nigerian startups to fail.
📌 Curious about how Nigeria’s Startup Act compares globally?
III.) Deep Dive: 10 Failed Nigerian Startups & Their Lessons
i.) 54Gene – The Hypergrowth Trap
- Founded: 2019
- Closed: 2023
- Funding Raised: ~$45M
What Happened?
54Gene aimed to revolutionize genetic research in Africa, attracting big-name investors. But after scaling too fast (expensive offices, Silicon Valley hires) without a solid revenue model, they burned through cash.
Investor Insight (Iyinoluwa Aboyeji, Future Africa)
“Many Nigerian startups burn through VC money without proving revenue models. That’s a huge mistake.”
Key Lesson: Funding ≠ Success. Validate unit economics before chasing exponential growth.
ii.) Lazerpay – When Crypto Markets Crash
- Founded: 2021
- Closed: 2023
- Focus: Crypto Payments
What Happened?
Lazerpay rode the crypto boom but had no fallback plan when crypto markets tanked in 2022/2023.
Founder’s Note (Emmanuel Njoku)
“We fought hard to keep the lights on but had to make the hard choice to shut down.”
Key Lesson: Diversify funding and product in volatile sectors like crypto.
iii.) Mocality – Battling Google for Customers
- Founded: 2008
- Closed: 2013
- Focus: Mobile Business Directory
What Happened?
Mocality accused Google of scraping its customer database—TechCabal’s investigation revealed that ~45% of Mocality’s SME leads were redirected to Google’s competing platform. This crippled Mocality’s revenue, forcing closure.
Policy Expert (NITDA Official)
“We’re refining data laws to prevent Mocality-like cases. Local startups need better protections.”
Key Lesson: If a global giant steps into your space, either offer hyper-local value or secure strong legal/technical safeguards.
iv.) DealFish (OLX Nigeria) – Outclassed by Giants
- Founded: 2011
- Closed: 2018
- Focus: Classified Ads
What Happened?
DealFish rebranded to OLX but couldn’t keep pace with Google Trader or Facebook Marketplace. High user acquisition costs and overshadowing by global players forced them out.
Key Lesson: Unique local differentiators are essential when competing with well-known global platforms.
v.) OkadaBooks – When Forex & Inflation Hit Hard
- Founded: 2013
- Closed: 2023
- Focus: E-Publishing
What Happened?
OkadaBooks initially thrived, even winning a Google Launchpad Accelerator grant. However, forex fluctuations spiked server costs, and inflation made e-books a luxury for many readers.
Key Lesson: If you rely heavily on imported tech or global SaaS, prepare for currency shocks and plan robustly for inflation.
vi.) Efritin – Data Costs & Low Adoption
- Founded: 2015
- Closed: 2017
- Focus: Classified Ads
What Happened?
Sweden’s Saltside funded Efritin, assuming Nigerians would browse ads like Europeans. High mobile data costs discouraged usage, leading to low traction.
Key Lesson: Market research is crucial—understanding local consumer spending and internet costs can make or break you.
vii.) Easy Taxi – Uber & Bolt Outmaneuvered Them
- Founded: 2013
- Closed: 2016
- Focus: Ride-Hailing
What Happened?
A Rocket Internet venture, Easy Taxi didn’t integrate cash payments early, while Uber and Bolt did, catering to Nigeria’s cash-first market.
Key Lesson: In Nigeria, localizing payment and user experience is non-negotiable.
viii.) Yarnable – A Twitter Clone Without a Twist
- Founded: 2011
- Closed: 2014
- Focus: Social Networking
What Happened?
Yarnable tried to replicate Twitter for Nigerians but offered no unique local spin. Users stuck with the real Twitter.
Key Lesson: Cloning a global platform rarely works—you need distinct, culturally relevant features.
ix.) Hytch – Infrastructure Nightmares
- Founded: 2023
- Closed: Same year
- Focus: Logistics
What Happened?
Hytch underestimated Nigeria’s logistics costs: poor roads increased vehicle maintenance by 40%, while fuel prices spiked 200% in 2023. With no financial reserves, they folded within months.
Logistics Startup CEO
“In Lagos, fuel prices and traffic doubled our delivery costs overnight.”
Key Lesson: In Nigeria, logistics is capital-intensive—be prepared for huge operational costs and possible policy changes.
x.) Gokada – The Lagos Motorcycle Ban
- Founded: 2018
- Pivoted: 2020
- Focus: Bike-Hailing → Logistics
What Happened?
Gokada soared initially, but the Lagos government banned commercial motorcycles in 2020. The ban left 12,000 riders unemployed and shuttered multiple bike-hailing startups. Gokada pivoted to logistics but faced an uphill recovery.
Key Lesson: Regulatory shocks can upend your startup overnight. Always keep alternate revenue streams in reserve.
IV.) Not All Fail: Lessons from Successful Nigerian Startups
It’s not all doom and gloom. Several companies have navigated the same challenges successfully:
| Startup | Key Success Factor | Lesson for Founders |
|---|---|---|
| PiggyVest | Profit-first, then scale | Don’t rely solely on VC funding |
| Paystack | Strong compliance & partnerships | Early regulatory planning pays off |
| MAX.ng | Pivoted early to EV & logistics | Diversifying revenue streams can be a lifesaver |
Takeaway: By researching local nuances, diversifying revenue, and prioritizing compliance, startups can thrive—even in Nigeria’s challenging environment.
V.) The Nigeria Startup Act: Can It Prevent More Failures?
The Nigeria Startup Act, passed in 2022, targets systemic issues through tax incentives, regulatory sandboxes, and a ₦10B Startup Investment Fund. This can help founders address funding gaps, high operating costs, and regulatory friction.
| Provision | How It Helps | Startups That Could Have Benefited |
|---|---|---|
| ₦10B Startup Investment Fund | Grants up to ₦50M, reducing reliance on VC funding | Lazerpay, 54Gene, Efritin |
| Regulatory Sandboxes | Test new models with reduced risk | Gokada, MAX.ng |
| Tax Incentives & Pioneer Status | Lowers operational costs (by ~20%) | OkadaBooks, Hytch |
| Data Protection Laws | Shields local businesses from data scraping | Mocality |
Downside? It doesn’t fix forex issues or ensure uniform state-level enforcement. Nonetheless, it’s a major step toward better funding, mentorship, and data protection.
📌 Need a deeper look at the Act’s constraints?
- Nigeria Startup Act Challenges: Key Gaps and How to Fix Them
- The Future of Nigerian Startups: How the Startup Act Will Shape Innovation
VI.) Five Non-Negotiables for Nigerian Founders
1. Don’t Chase Vanity Metrics
- 54Gene raised ~$45M yet collapsed. Focus on sustainable revenue, not just hype.
2. Adapt to Local Realities
- Efritin ignored data costs; Easy Taxi missed cash preferences. Market research is vital.
3. Anticipate Policy Shocks
- Gokada never foresaw a blanket ban. Always have a Plan B.
4. Diversify Funding & VC Investment in Nigeria
- Lazerpay relied on crypto VCs alone. Mix in angels, grants, or revenue-based financing.
5. Use Government Incentives & Best Startup Practices in Nigeria
- The Startup Act offers tax breaks, seed funds, and mentorship. Leverage it early.
VII.) Next Steps: Actionable Strategies to Avoid Becoming a Failed Nigerian Startup
- Apply for Nigeria’s Startup Investment Fund
- Join an accelerator like CcHub or Techstars Lagos for mentorship
- Network with investors via ABAN or the Lagos Angel Network
- Use Low-Tech Solutions (e.g., USSD or SMS-based features) to reach customers with limited data
- Stay Compliant—Don’t ignore local regulations or data protection laws
Investor Perspective (Tomi Davies, ABAN)
“We have capital, but we need founders who truly understand Nigeria’s market and can adapt fast.”
VIII.) Final Take: Nigeria Is Tough, but Winners Adapt
Yes, running a startup in Nigeria can feel like navigating a minefield—forex volatility, patchy infrastructure, shifting regulations. Yet the massive market size and hungry, youthful population offer unparalleled opportunities. The difference between the success stories (like Paystack, PiggyVest, MAX.ng) and the failures (like 54Gene, Lazerpay, Mocality) often comes down to early planning, local adaptation, and strong backup strategies.
So if you’re ready to take the leap, do your homework, engage with the Nigeria Startup Act, and build real value that resonates with local users. With resilience, cultural insight, and a bit of luck, your startup could be the next big thing—despite the odds.
