A review of hundreds of African startups that closed between 2014 and 2025 reveals a continent arriving at a crossroads: the era of building in regulatory silence is over. In its place, governments have become the single most consequential variable in the African startup equation — more decisive, in many cases, than product, talent, or capital.
THE NEW LANDSCAPE
The story Africa’s startup ecosystem told about itself for the better part of a decade was a story of defiance. Founders built payment rails where banks would not go. They assembled logistics networks on roads no government had repaired. They connected rural farmers to global markets using smartphones that arrived before electricity. When capital finally came — from Silicon Valley, from London, from Abu Dhabi — it came, in part, for this quality: the capacity to build in the absence of the state.
That narrative is no longer sufficient. The startups that closed across Nigeria, Kenya, Ghana, Egypt, and South Africa between 2014 and 2025 did not, in the main, fail because customers disappeared or technology stalled. A significant number of them failed because the state arrived — and arrived on terms that the business could not survive.
Regulation, in this context, is not pathology. Governments have legitimate reasons to manage financial systems, transport networks, and carbon markets. The question worth asking is not whether they should regulate, but how they do it — and what it means for innovation when the answer, repeatedly, is: suddenly, and after the money is already deployed.
“Regulation did not gently constrain these startups. It arrived as a cliff.”
HOW IT HAPPENS: THE PATTERN
The Permission of Silence
The most consistent thread running through Africa’s regulatory startup failures is this: companies launched in spaces where policy frameworks did not yet exist, and treated that absence as authorisation. Grey zones — markets that were neither explicitly permitted nor explicitly prohibited — became, in effect, the primary terrain of African startup entrepreneurship.
This was rational. In markets where formal banking penetration remains low, where identity infrastructure is incomplete, and where legislative processes move slowly, waiting for regulatory clarity before building is often equivalent to never building at all. The grey zone was not evasion — it was, for many founders, simply the only available map.
What founders generally failed to model was what happens when the state decides to draw a line through that grey zone. African regulators, when they move, do not typically move to enable the market they find. They move to formalise it — and formalisation in practice has frequently meant restriction, not legalisation.
Nigeria’s Central Bank restricted banks from servicing crypto-linked entities in 2021. The directive did not declare crypto illegal. It simply severed the financial infrastructure on which crypto startups depended. Within two years Bundle Africa Pillow, and others had all shut down — not because customers left, but because moving money became operationally impossible.
Regulation Arrives After Capital, Not Before It
There is a structural mismatch at the centre of Africa’s startup-regulation story. Venture capital is governed by timelines: seed rounds close, Series A rounds follow, capital is deployed against growth targets that typically span eighteen months to three years. Regulatory frameworks, particularly in developing markets, are governed by entirely different timelines — they emerge from legislative processes, inter-ministerial negotiations, and policy evolutions that may take a decade to resolve.
The startups that suffered most acutely were those that raised aggressively, scaled rapidly, and built deep infrastructure — precisely the behaviours that venture capital incentivises — into markets that were, in regulatory terms, still unresolved. By the time governments acted, the capital had been spent. There was no buffer remaining to absorb the cost of compliance, licensing, or pivot.
BY THE NUMBERS
Of the hundreds of startups we examined, more than half shut down in the two-year window of 2022–2023. This clustering was not coincidental. It reflected the intersection of three forces arriving simultaneously: post-COVID regulatory tightening, a global VC pullback that eliminated the capital buffers companies needed to survive compliance disruption, and currency devaluations in Nigeria and Kenya that made operating costs structurally unviable. Regulation was the trigger. The compressed capital environment made the wound fatal.
CASE STUDIES IN POWER
Lagos, 2020: The Overnight Market
There is perhaps no cleaner illustration of regulation as market force than what happened to Lagos’s motorcycle-hailing industry on February 1, 2020. With a single executive order, the Lagos State Government banned motorcycles and tricycles from operating in key commercial and residential areas of Nigeria’s most populous city. The directive was not a gradual phase-out. It was immediate.
Gokada, which had raised $5.3 million in venture capital and built its entire value proposition on motorcycle-hailing in Lagos, had its core business outlawed in a matter of hours. OPay, one of the continent’s most capitalised fintech companies at the time, shut down its ORide, OCar, and OExpress units by the end of the same quarter. The ban did not distinguish between well-run companies and poorly-run ones. It did not account for the capital that had been deployed. It simply ended the market.
What followed for Gokada is instructive. The company pivoted to last-mile logistics — a legitimate strategy, rationally executed. It shed staff, sold assets, and rebuilt around a different model. And it survived: for four more years, grinding through declining revenues, a failed acquisition attempt, and a deepening capital drought, before filing for Chapter 11 bankruptcy protection in Delaware in October 2024. Gross revenues in its final year were $118,988. They had been $268,779 the year before. The pivot kept the company alive long enough to document its slow collapse.
“The ban did not merely slow growth — it destroyed the original market.”
Nairobi, 2025: When Government Is the Business Model
If Gokada represents regulation arriving to destroy an existing market, Koko Networks represents something more extreme: regulation withholding the market’s very existence.
Koko was, by almost any measure, a serious company. Backed by over $300 million in infrastructure investment from institutions including the Mirova Gigaton Fund and Microsoft’s Climate Innovation Fund, it built a nationwide network of automated bioethanol fuel dispensers across Kenya — 3,000 KokoPoints at peak — designed to wean 1.5 million households off charcoal cooking. The company had signed investment framework agreements with the Kenyan government. It had secured a $179.6 million guarantee from the World Bank’s Multilateral Investment Guarantee Agency specifically to protect against political risk.
It had done, in short, everything that a sophisticated institutional investor would require of a climate infrastructure company seeking to derisk its government exposure.
It was not enough. Koko’s business model depended on selling carbon credits into compliance markets under Article 6 of the Paris Agreement — a process that required a Letter of Authorisation from the Kenyan government. That letter never came. Without carbon revenue, the subsidies that made bioethanol affordable for low-income families collapsed. Without subsidies, the economics failed entirely. In early 2026, after two days of emergency board meetings, Koko informed its 700 employees that they were out of a job.
The 3,000 fuel dispensers now stand across Kenyan neighbourhoods as hardware monuments to a business model whose fatal dependency was not on technology, or customers, or capital — but on a document that a government chose not to issue.
THE BROADER LESSON
Koko’s collapse is not simply a story about one company’s misfortune. It is a warning for an entire category of African climate-tech startups: those whose unit economics depend on state validation. In such models, the government is not a stakeholder — it is the business model. When it withholds cooperation, no amount of private capital, insurance, or infrastructure investment can compensate.
FOUR THINGS THE DATA TELLS US
I. Banking Access Is the Ultimate Enforcement Mechanism
Regulators across Africa have discovered that they do not need to ban industries to effectively shut them down. They need only restrict access to bank accounts. When Nigeria’s Central Bank directed commercial banks to sever relationships with crypto-linked entities, it did not make cryptocurrency illegal. It made it unbankable. For startups whose operations depended on the ability to receive payments, pay staff, and settle with counterparties through the formal banking system, the effect was indistinguishable from prohibition.
II. Licenses Grant Existence, Not Scale
A persistent assumption among African startup founders — and, arguably, among the investors who backed them — was that securing regulatory licenses provided durable protection. The record suggests otherwise. Several Nigerian fintech startups operated with valid licenses but found that as regulators clarified rules around payment switching, settlement infrastructure, and consumer wallets, the space available to legally operate at scale contracted sharply. Being licensed meant being permitted to exist. It did not mean being permitted to grow.
III. Infrastructure Dependency Is Regulatory Fragility
Software companies can pivot. Hardware and infrastructure companies cannot easily redeploy their capital when regulations change. Gokada had motorcycles. Koko Networks had 3,000 dispensers. When the policy environment shifted, these assets became liabilities rather than moats: too costly to write off, too dependent on now-changed regulatory conditions to repurpose at viable cost.
IV. Founders Recover. Companies Do Not.
Perhaps the most telling data point in this entire review is one that rarely appears in postmortems: roughly forty percent of the founders studied went on to start new ventures after their companies shut down. The co-founders of 54gene went on to build Rayda and lead Syndicate Bio. Yele Badamosi left Bundle Africa to co-found Nestcoin. The talent did not disappear. In many cases, it regrouped, adapted, and returned. What this tells us is that Africa’s startup ecosystem loses companies, not capability.
WHAT COMES NEXT
A More Political Phase
Africa’s innovation story is entering what might be called its political phase. For a decade, the dominant question was whether founders could build and whether capital would come. Both questions have been answered, imperfectly but decisively, in the affirmative. The question that now defines the continent’s startup trajectory is different, and harder: whether states are willing and able to co-evolve with the markets their entrepreneurs are creating.
The structural challenge is significant. African regulatory institutions are, in most cases, under-resourced relative to the pace of digital market development. Policy frameworks built for analogue financial systems are being asked to govern blockchain-based remittances. Transport regulations designed for fixed-route vehicles are being asked to address algorithm-matched ride-hailing. Carbon accounting rules developed for industrial emitters are being applied to distributed clean-cooking infrastructure. The mismatch between regulatory capacity and market reality is not a character flaw in African governance. It is a genuine structural gap.
“The question is no longer whether founders can build, or whether capital will come. It is whether states are willing to co-evolve with the markets their entrepreneurs create.”
The Lesson for Founders
For founders still building on the continent, the data presents an uncomfortable set of imperatives. Regulatory intelligence — the deep, political, relationship-based understanding of how specific governments are likely to respond to specific markets — must be treated as a core competency, not a compliance afterthought. The grey zone is not a defensible competitive position. It is a deferred liability, accumulating interest until the state decides to collect.
The founders who have most successfully navigated African regulatory environments share a common trait: they invested in government relationships before they needed them — Nigeria’s Flutterwave averted a potential deletion by the Central Bank of Nigeria following its alleged support for the #ENDSARS protests largely because of the influence of an insider. Others modelled regulatory risk scenarios with the same rigour they applied to financial projections. They treated the government not as a passive background variable but as a counterparty — one with its own interests, pressures, and timelines that must be understood and managed.
The Lesson for Capital
For investors, the message embedded in four decades of African startup failure is equally direct. Regulatory risk in Africa is no longer an abstract line item in a risk register. It is a primary market variable. The relevant questions are not merely ‘is this legal?’ but ‘how dependent is this business model on government cooperation that has not yet been explicitly granted?’ and ‘what happens to the asset base if the regulatory environment closes the grey zone?’ Those are questions that neither Silicon Valley’s standard due diligence frameworks nor development finance institutions’ project appraisal methodologies have been adequately equipped to answer.
The continent’s entrepreneurial generation has been tested, in the past decade, by infrastructure deficits, currency collapses, pandemic disruptions, and capital droughts. What the evidence now suggests is that none of these forces was quite as decisive — or as underestimated — as the slow, episodic, and often arbitrary exercise of state power.
Africa’s governments did not fail their startups through malice. Most did not fail them through indifference. They failed them, in large part, through a structural incapacity to keep pace with markets that moved faster than policy, combined with a tendency — when they did act — to act in ways that resolved ambiguity through restriction rather than enabling frameworks.
Whether that changes will determine not just the fate of individual companies, but the trajectory of one of the world’s most consequential economic experiments: the attempt to build, from within the continent and from scratch, a technology sector capable of solving problems at African scale.
In Africa, the market is not just customers and capital. It is government. The founders who forget that, or choose to ignore it, are not just taking a business risk. They are taking a political one.
