Fatu Ogwuche: Can African startups leverage no-code tools to raise pre-seed?

African startups are in the third year of a brutal winter, with foreign investors tightening their pre-seed purse strings. But, there’s hope – and it’s no-code.

Plus, in shocking news, Kenya’s top logistics startup Sendy shuts down, and startups are raising less than they did in their heyday—big surprise.

Let’s dive in.

3 big things:

• No-code to pre-seed.
• It’s still fundraising winter.
• Sendy’s transition.

The short: Startup fundraising is experiencing a Year over Year decline, rounds at lower valuations, and some shutdowns – and these days, it costs more to build a product, show traction and raise pre-seed funding.

While not the hottest topic, African startups are exploring success with no-code tools.

The allure of no-code: No-code tools allow founders to build robust, versatile web apps, and mobile apps, with simple drag-and-drop interfaces that don’t require technical experience. These are best for non-technical founders.

On the other hand, low-code tools deliver the same as no-code tools but require a bit of code and technical knowledge. 

Low-code tools increase the efficiency of developers. So, rather than building everything from scratch, low-code tools allow developers to use less code, speeding up workflows, decreasing ship times, and ultimately increasing the output of developers and engineering teams.

Build without spending a fortune: Most founders in the idea and pre-seed stages recruit engineering talent to build out their minimum viable product (MVP), show traction and then raise funding.

With software developers in Africa costing more than $82k/year, founders must spend a ton or give up equity to get a product to market.

However, no-code and low-code tools provide a sustainable alternative.

America paves the way: Founders and teams in the US have built products, grown usage, and raised pre-seed funding without spending a ton on engineering talent.

Then post-seed funding, they recruit engineering talent, scale their product and raise subsequent rounds.

Startups in America adopted no-code tools from platforms like Bubble to take their products to market. And with the current economic climate, African startups are taking a page from the American playbook.

They’re adopting tools like Bubble to build web apps, Webflow for websites, Glide for mobile apps and Airtable for databases.

Billion-dollar success: Some startups have raised significant funding with no-code and low-code tools.

Startups that used Bubble raised over $10.3b in funding to date.

However, while exploring the utility of these tools, it’s essential to show relevance to African startups looking at raising a pre-seed round. 

US career-tech startup Teal raised $5 million in pre-seed, with a similar model to the Nigerian ed-tech platform Jobberman. Comet, with a similar model to a talent-op platform like Andela, raised $13 million to date – providing more validation for startups raising money in competitive industries with no-code models.

Final thoughts: Global startups have witnessed success with no-code tech stacks and over $10b in funding raised using platforms like Bubble.

Kenyan Logistics Startup Sendy is Shutting Down

As conditions in Africa make it more expensive to recruit engineering talent, startups on the continent are exploring these tools to help them get their products to market, gain traction, and raise pre-seed funding.

It’s a viable option than waiting on pre-seed before taking your product to market.

The short: Kenyan Logistics startup Sendy, who raised $26.5m to date, is shutting down its operations and is negotiating to sell its assets.

Save thyself: For the past year, Sendy took different actions to cut costs and extend its runway:

• They cut 10% of their workforce
• Laid off 54 employees
• Shut down its supply service
• Exited its fulfilment offering in Nigeria

Fundraising bust: Last year, Sendy targeted a $100m fundraise to continue operations, but it only raised a fraction of the initial goal.

Since this deal, they explored other options but kept missing targets.

High valuation, new acquisition: At its peak, Sendy was valued at over $80m – but this didn’t move the needle in saving the business as they entered talks with several investors to raise additional capital at a lower valuation range of $40m to $60m. 

The goal post shifted, and instead of new capital, an acquisition seemed like a better option.

Final thoughts: B2B e-commerce startups had a good run – raising millions of dollars at sky-high valuations. But, prevailing macroeconomic conditions across Africa have made their growth and valuations unsustainable, leading to startups taking down rounds, bridge rounds, or in the case of Sendy, shutting down altogether.

It’s a brutal market.

African startup funding reduced by a whopping 46.5%!

The short: Startup funding data for July is out. Across 20 disclosed deals, African startups cumulatively raised $123.4 million, according to Benjamin Dada. 

By the numbers: This is a 46.5% year-over-year (YoY) decrease from the amount raised in July 2022. Fundraising also witnessed a 2.8% decrease from what was raised in June 2023.

Unevenly distributed: While the total amount raised is not under $100m, it’s also not evenly distributed across the continent.

East African startups accounted for most of the funding.

Startups in Rwanda, Kenya, and Somalia raised about $46.2m, 37.5% of the total.

Surprisingly, Central African startups were next, raising $40.5m, 32.8,% with DRC accounting for this.

West African startups raised $26.6m, 21.6% of the total.

North African startups were last, raising only $10m, 8.1% of the total.

However, there was no disclosed funding for South African Startups.

Industry distribution: For the second month running, clean-tech startups accounted for 32.4% of the total amount raised.

Fintech accounted for 17.6%, logistics 17%, and health tech 16.8%.

16.2% of the total raised was distributed across other industries.

Pre-seed deals are hot: Pre-seed startups led the funding, with Nigerian invoice-financing startup Zuvy raising $4.5m – the highest pre-seed raise for the month. Following closely behind, Nigeria’s MyCover.ai and Egypt’s Exit MENA both raised $1.2m

Seed startups also progressed with Egyptian fintech startup Flash, raising a $6m seed round.

Kenya’s MyDawa in the health tech industry raised the most Series A, with $20m in debt and equity financing.

The big winners: On the bright side, 2023 has seen some big raises from African Startups.

• MNT-Halan – $400m
• M-Kopa – $200m debt & $55m equity
• Sun King – $130m
• Planet42 – $100m equity & debt
• Nuru – $40m
• Victory Farms – $35m
• Lulalend – $35m

Final thoughts: Since the 2nd half of 2022, startup fundraising in Africa has been slow, but there’s been a consistent YoY decrease across multiple industries.

The consistent drop in funding is attributed to the challenging macroeconomic conditions we’re currently experiencing in Africa.

Nonetheless, resilient teams will push through, survive and thrive.

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Fatu is a tech media entrepreneur and the CEO of Big Tech This Week, a leading media company that delivers weekly insights on the most significant developments in African tech. With a passion for technology and a deep understanding of the African tech landscape, Fatu has positioned Big Tech This Week as a trusted source for the latest news, insights, and trends shaping Africa’s tech industry.  Through Big Tech This Week, Fatu is amplifying the narrative around African tech and showcasing its transformative potential to inspire a new generation of innovators.