The global startup ecosystem has witnessed its fair share of founder-investor conflicts, and the African startup scene is no different.. Post-Bench — the Canada-based accounting and tax platform that shut down after raising $113 million — founders worldwide are reconsidering their cap tables. As one founder starkly put it: “Never raise money from Tier 3 VCs. Every horror story I hear is from uncalibrated VCs with no operating experience who think they can tell a founder how to run their company.”
Bench’s saga, which saw co-founder Ian Crosby step down in protest against investor decisions, highlights a recurring pattern: ousting founders often destabilizes startups rather than saving them. Crosby, reflecting on his resignation, remarked, “Rather than continuing to fight with me, they opted to replace me, thinking they could run the company better. I was totally convinced their approach would destroy the company. I resigned to give them the best chance of succeeding.”
Africa’s startup ecosystem has seen similar upheavals, marked by tensions, missteps, and exemplary tales.
In 2022, Egyptian B2B e-commerce startup Capiter became a poster child for the perils of founder ousters. Founded in 2020 by Egyptian brothers Mahmoud and Ahmed Noah, Capiter initially dazzled investors. The B2B e-commerce platform claimed a sprawling network of 1,000 sellers, 600 trucks, and over 2,000 employees. It secured $33 million in funding from marquee investors, including Quona Capital, MSA Capital, and Accion Venture Lab.
But by 2022, cracks had widened into chasms. The founders were accused of mismanaging funds and ignoring board queries during a critical due diligence process preceding a potential merger. Speculations about financial impropriety swirled, though some, like entrepreneur Walid Rashid, attributed the collapse to poor decisions rather than outright fraud. Ultimately, investor mistrust and unresolved disputes led to Capiter’s liquidation.
Kenya’s iProcure, an agritech innovator, saw its fair share of the bargain. The startup grew from a modest startup to a regional powerhouse, providing stock management tools to agro-dealers and serving over a million farmers. By 2022, it was generating $14 million in annual revenues and had secured $10.2 million in Series B funding.
Yet, success came at a cost. New investors insisted on professionalizing operations, inflating the wage bill by 130%. “We were profitable with good margins,” noted co-founder Alex Carcoforo, “but the pressure to scale and accommodate new management derailed us.” iProcure’s eventual liquidation highlighted the fragility of over-ambitious growth.
In Nigeria, HealthPlus’s Bukky George faced a turbulent ouster following Alta Semper’s $18 million investment. Accusations of unmet funding promises and operational interference culminated in George’s removal as CEO. While George alleged sabotage, Alta Semper appointed Chidi Okoro as Chief Transformation Officer, leading to court disputes and a fractured business. Eventually, Ghana’s mPharma acquired a majority stake in 2022 putting the company under the control of Kwesi Arhin (mPharma’s one of vice presidents), leaving George to launch a new venture, HealthCentral Pharma.
Not all founder ousters stem from investor overreach, it must be noted. In Nigeria, WeJapa’s Favour Ori was forced out in 2020 after allegations of extortion and contract breaches surfaced. Similarly, Ghana’s fintech Dash faltered after founder Prince Boakye Boampong faced allegations of exorbitant salaries and fund misappropriation. But despite their replacements, both startups have struggled to recover.
On a positive note, Kenyan agritech giant Twiga Foods provides a rare example of a relatively smooth founder-to-CEO transition. Founder Peter Njonjo’s resignation and subsequent exit from the board came after a decade of steering the company. While the transition involved backstage squabbles, the company’s robust governance structures and the founder’s willingness to prioritize the startup’s growth helped mitigate fallout.
Why Ousters (Also) Rarely Work in Africa
From these stories, several recurring themes are worthy of note:
- Cultural Clashes: Many ousters are staged as coups, breeding suspicion and resentment among stakeholders. This erodes trust and disrupts continuity.
- Investor-Driven Pressures: The push for rapid professionalization often inflates costs without guaranteeing corresponding revenue growth.
- Distrust and Litigation: Legal disputes between founders and boards consume resources and tarnish reputations, hindering recovery efforts.
- Vision Misalignment: Replacing visionary founders with operational managers can dilute the original mission, alienating customers and employees.
- Lack of Collaborative Exits: Founders and investors in Africa mostly don’t align on exit strategies early, ensuring transitions prioritize the startup’s long-term success over short-term gains. This is even harder, given that harsh realities surrounding the ousters.
Paul Graham, co-founder of Y Combinator, has further articulated the fundamental disconnect between founders and professional managers. He argues that founders bring a unique, irreplaceable “founder mode” that prioritizes innovation, adaptability, and vision — qualities often absent in professional managers trained to focus on process and hierarchy. “The way managers are taught to run companies… often means hiring professional fakers who drive the company into the ground,” Graham notes. African startups have repeatedly fallen victim to this dynamic.
The Bottom Line
Smooth transitions require alignment, respect, and clear communication. For investors, understanding the founder’s vision and collaborating rather than confronting can yield better outcomes. For founders, choosing partners with aligned values and preparing for succession early are critical steps.
As Africa’s startup ecosystem matures, these fearsome tales serve as stark reminders of the delicate balance between growth and governance. While new CEOs may bring fresh perspectives, their success often hinges on confronting the complexities of founder legacies, investor dynamics, and market realities.