Africa’s startup ecosystem is brimming with innovation, yet many promising ventures collapse before reaching their full potential. According to the 2024 Startup Graveyard Report, 58 percent of startups fail due to financial difficulties, 27 percent due to operational challenges, and 17 percent due to regulatory obstacles.
However, a common thread among these failures is the absence of strong governance structures, a crucial yet often overlooked factor in startup success, the report revealed.
Despite the high-risk nature of early-stage startups, many founders resist establishing formal boards, perceiving them as bureaucratic hurdles rather than strategic assets. Without governance structures in place, many startups burn through funding, prioritising aggressive growth over a clear path to profitability.
For instance, Dash, a Ghanaian fintech startup, secured $85 million in funding and expanded into multiple African markets. However, weak internal governance led to financial mismanagement, regulatory non-compliance, and eventual collapse.
Similarly, Sendy, a Kenyan logistics startup, struggled with cash flow and operational inefficiencies after expanding beyond its financial capacity. According to the report, a well-structured board could have provided the oversight needed to ensure a more measured growth trajectory.
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Africa’s regulatory environment is complex and constantly evolving, yet many startups fail to account for compliance risks. The report detailed how regulatory crackdowns led to the shutdown of fintech startups such as LazerPay and BuyCoins Pro.
These companies faced legal challenges due to compliance failures, issues that could have been mitigated with stronger governance frameworks. Omobola Johnson, Senior Partner at TLcom Capital, emphasised that governance is not about control but risk mitigation.
She argues that having a board with regulatory expertise can help startups navigate compliance challenges before they escalate into existential threats. This proactive approach can prevent unnecessary legal battles, financial losses, and reputational damage.
While governance lapses have led to the downfall of many startups, others have thrived by embracing structured leadership. The report highlighted that unicorn startups such as Flutterwave, Moniepoint, and Interswitch have leveraged strong governance frameworks to achieve sustainable growth.
It added that these companies have implemented clear financial controls, diversified revenue streams, and ensured regulatory compliance, reducing their risk exposure. The report further noted that the misconception that governance is only for large corporations is costing African startups millions. Well-structured boards provide a competitive advantage by offering strategic direction, ensuring financial discipline, and fostering regulatory compliance.
As Africa’s startup ecosystem matures, founders must rethink governance, not as a constraint but as a catalyst for growth.
“With funding becoming increasingly scarce and regulatory scrutiny tightening, governance is no longer optional; it is essential for survival,” the report added.