Crypto Startup Wala Shuts Down: The Case of an Underfunded Startup Tackling a Global Problem
Wala, the South African cryptocurrency startup that allows users perform all of their financial and transactional services on its platform has shut down.
This shut down was confirmed by the startup’s CEO Tricia Martinez in a blog post where she also stated the reasons for the shut down.
Founded in 2015 by Samer Saab and Tricia Martinez, the startup provided users with a digital financial platform built on Ethereum Blockchain. Using this platform alongside it’s own cryptocurrency, Dala, customers are able to send money, pay for bills – even school fees, earn rewards and apply for loans.
These range of services and more the startup hoped to provide to the 3.5 billion unbanked consumers in Africa. But that might not be happening, at least not from Wala.
In her Medium post, “Dala: Where Things Went Wrong”, Martinez made known the unsuccessful attempts of the startup to raise funds amongst others which led to the retrenchment of staffs and an eventual shutdown.
Launching its Dala token in April last year, the startup was able to create a decentralised financial system for emerging market consumers. And in just 4 months of launch, over 150,000 users (mainly Ugandans) were signed up and began transacting with Dala through the Wala mobile app. This massive growth was spurned by Dala’s rewards model which gave an incentive to users upon transacting. And according to Martinez, this was more than what the team had expected.
“We wanted to build a new financial system for consumers in countries throughout Africa who have been underserved because of their geographical location and economic status. In the first 4 months Dala token users grew faster than we could imagine.”Tricia Martinez, CEO, Wala.
But this reward system was the startup’s first headache as scammers were exploiting it. However the startup was able to get around this by changing the rewards model several times and having to remove flagged users abusing the system.
But then, the startup has a bigger issue to surmount – infrastructure. According to Martinez, the startup’s partners systems (products and services like airtime, data, and electricity) would regularly turn off due to internet problems and/or their own poor infrastructure.
This led to many users being unable to use Dala to transact and many people started to loose hope in its system.
Outages from local banks and mobile money services also strained the flow of capital in and out of the system.
These forced the startup to expand the scope for Dala and build more infrastructure than they had earlier anticipated at that stage. But irrespective of this, the startup was confident in delivering its solution and strived to reignite growth and bring users into its system – which was now more robust.
But to do this it needed funds, and this dealt last straw that broke the startup’s back.
Little Funding, Limited Resources, Global Problem
Funding is very important for a startup’s survival and for a startup like Wala, it cannot be over emphasised. According to Martinez, the startup survived off very little funding.
With over 150K Dala wallets and more and more partners wanting to work with us we had a lot on our plate with limited resources.Tricia Martinez, CEO, Wala.
They raised $1.2 million of a $30 million target in an initial coin offering (ICO) in December 2017. Way short of its target, the startup still made do with it however, “we were able to make $1M go a very very long way,” Tricia said.
But with the expansion, the startup needed more funds to pull through, but they didn’t break even as many investors were not ready to put their money in a Africa-focused crypto startup.
“For 8 months I traveled across the globe, pitching investors in blockchain, fintech, impact, African focused, etc. I met and engaged with over 100 investors and despite our early growth numbers, we couldn’t secure the necessary financial support we needed to continue growing and operating.”
The led to the startup cutting back on its offerings. They turned off deposits but left withdrawals open, after which they had no choice but to lay off most of the team and turn off the app entirely.
This story reiterates the many things that could go wrong for a startup that lacks funding. And its an unfortunate end for such a promising startup.
We wish every Wala team member goodluck moving forward.
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