Shutdown of The Peer: A Case Study in Startup Closure
Abundant Runway, Early Shutdown
Despite having up to twenty months of runway, Nigeria-based API startup The Peer made the unexpected decision to shut down in April. The shutdown, attributed to a failure to find product-market fit, will see investors recoup a portion of their funds.
Return to Investors
The startup is expected to return approximately $350,000 of the $2.3 million raised to investors, with a burn rate of less than $20,000 monthly. CEO Chike Ononye confirmed the return of invested capital pro-rata to investors.
Strategic Shutdown
The Peer’s decision to shut down early challenges the common narrative of perseverance in the startup world. However, the move may lead to better outcomes, especially in uncertain economic times. Fifteen high-profile African startups closed in 2023 due to worsening macroeconomic conditions and declining VC funding.
Reasons for Closure
Despite a significant runway, The Peer opted to shut down as it struggled to onboard customers at a satisfactory rate to achieve revenue goals. The startup experimented with various products and business lines but was hesitant to pivot using investor funds.
Investor Composition
Investors in The Peer include notable names like Chipper Cash, Flutterwave, and Sunu Ventures, among others. The startup raised $220,000 in a pre-seed round and an additional $2.1 million in a seed round in June 2022.
Product Challenges
While The Peer’s product showed promise, similar to Flutterwave, it failed to achieve scalability and generate substantial revenue. Despite processing over $500,000, the startup only generated less than $1,000 in revenue in the first three quarters of 2023.
Market Challenges
African markets were not ready for wallet-to-wallet transactions at scale, citing compliance challenges and limited support from fintech partners. Additionally, potential clients had numerous alternatives, including more established payment companies like Paystack and Flutterwave.
Exploration of Alternatives
Before shutting down, The Peer explored acquisition opportunities with several startups. However, no acquisition materialized, as their plans did not align with larger firms’ strategies.
Conclusion
Industry experts suggest that The Peer’s product may have been ahead of its time for the market, highlighting the challenges of introducing innovative solutions in evolving landscapes.