On the 22nd of June, screenshots of Wangari Stewart’s comment on Kune’s closing down announcement roamed the Kenyan social media pages. To some, it spoke a truth they wanted to convey so much, to others it was a little harsh. That said, let’s talk about Kune. After all, someone’s vision has just been shut down. Being a founder is hard. You are not only responsible for the company’s vision, but you’re also responsible for your employee’s wellbeing, managing stakeholders and making sure you never run out of money. When it all goes to shit, it can be painful. I feel sorry for those that lost their jobs, investments, valuable partnerships and relationships.
So, what went wrong?
Kune received $1M pre-seed to set up its Foodtech company in Kenya in June 2021. At the time, I had mixed feelings about the company, following its TechCrunch article. Their goal was to provide affordable, convenient, tasty meals.
Was there an affordable food problem in Kenya? Did this founder hit the jackpot, having spent just 3 days in Nairobi? Unlikely! So, what went wrong? I reviewed Kune’s deck in the early days and there were a few things that stood out for me. Let’s call them to tell signs that this was not a billion-dollar company.
1. Market understanding
For most Kenyans that there wasn’t a problem area in this case. At best, the company was just another kitchen in Nairobi. The problem areas identified missed out on a lot of other factors. Food in Nairobi can’t be sourced from just Uber eats or a Kibanda?
First of all, affordable food is relative, and the target audience varies. The pilot focused on executive offices in Sentue Plaza, whose response was overwhelmingly positive. But of course, they were a steal at $3 food, compared to what such executives are used to. For executives who eat $30+ meals, this was a steal.
Although, realistically, what were the odds that these executives would eat the same meal every day? So, who would be the next target consumer? How about the average Nairobian who spends $15 on ordering out? How often do they order from the same place? Was Kune’s product attractive enough to ensure it had returned consumers over and over?
On the other end of the spectrum there are the ‘kibandas’, which contrary to the company’s beliefs, offer great affordable food. For Kibanda customers, Kune might have been pricier at $3.
Between the Kibanda, the uber eats and the high-end restaurants, where did Kune feature? Well, in my opinion, it was just another kitchen with an app.
2. The team
There was always speculation as to how the team managed to raise the $1M, to begin with. With a founder new to the African market, let alone Kenya, and an executive team with limited experience in Kenya or the industry, how likely was the team going to succeed? This was also coupled with most of the advisory team being expat founders in very different sectors. For me, this was a red flag. Why wasn’t there an industry expert on the team? A Kenyan co-founder? Maybe we’ll get insights on this at a later stage, once all the dust has settled.
3. The execution: start-up or business
I consider a start-up an organisation with the potential to scale rapidly, which is often asset and capital light. Meanwhile, a business is an endeavour which tends to be slower-paced in its growth but is often asset heavy. Plus, a lot of businesses aren’t tech-led.
Everybody wants to create a start-up. The African ecosystem has seen a surge of funds flowing in, with start-ups in Africa raising $1.8b in Q1–22, 2.5x the amount raised in Q1–21. It almost looks like there’s more money than there are start-ups. But was Kune a start-up or a business with an app?
At its barest, Kune’s model was cooking and selling food. It should have been run as such. From the get-go, the company was labelled as a Foodtech, but it wasn’t. It was a food company. The company was capital intensive and asset heavy. Building a factory, a fleet and hiring 90 people is rarely the first step in launching a start-up. This was a business and should have been run as such.
4. The product
Food; some sell it as an experience, some as just a product. I have tried Kune’s food. Curiosity got the better of me. My review: it was okay. It was food. Nothing memorable, nothing close to terrible. But would I order it more than thrice? No. The reason has nothing to do with Kune, it’s just that Nairobi has so many offers. Bolt alone has 50–80% off offers every other month. Jumia is a close second. These platforms offer a huge array of food options, African, Asian, European, and American. The list never ends. If I was to order out, I’d want an option that is more than just okay. So how was Kune’s food different? For me, it was a drop in an ocean.
5. The burn-rate
The race against insolvency! For start-ups, it is always about the next raise. For a lot of people, it was shocking that the company was shutting down. What happened to the $1M, is the one-million-dollar question!
Well, access to capital often means access to resources and the best talent to push the company forward. The company built a factory, with the traction of 500 meals a day, hired until a month before it shut down and spent quite a bit on billboard advertisements in strategic locations across Nairobi.
I’m sure the company did this with the best intentions to grow, unfortunately, they didn’t make revenue as fast. With just 6,000 customers, averaging about 30 a day, the company was not doing great even by Kibanda standards, who typically average about 50 orders a day (and those didn’t have the infrastructure costs). Without cash inflow, all of the aforementioned decisions just became poor cost management choices. Thus securing another raise would’ve been difficult.
Lessons to be learnt?
At the end of the day, when a company shuts down, it is devastating to those who bought into the vision and dream, people lost their jobs and investors their money. However, there are some lessons we can learn here.
1. It was very brave of the founder to make the announcement and vouch for his team. About 85% of start-ups fail; we rarely hear about their shutdowns.
2. Expat founders need a market specialist. Enough with the expat saviour who sees a problem in a market, they’ve barely been in! Talk to a local.
3. The African ecosystem needs to present Africans with spaces that connect them to investors. We all know networks result in raises. Wouldn’t it be nice to have great ideas resulting in raises? I must acknowledge that this has come a long way with the likes of Future Africa, HoaQ, Rally Cap and Microtraction.
4. Empathy and scepticism can co-exist. Be kind to founders, most of them truly believe in their vision.
5. Investor FOMO is real. If you can get a few to commit, it’s likely the rest will follow suit. No judgement, it’s just nature.