Last week, a little birdie whispered in my ear about a reasonably new startup that I had assumed was growing massively based on all their social media posts that had not paid its employees since February 2025. To make matters even worse, the same employees were told not report back to work until they sorted out their financial challenges, at some point in the future, at which point they would be paid their backlog in salaries as well as resume working. This all sounded like pure fantasy to me!

To make matters even worse is that this particular startup’s current financial predicament has been occasioned by the founders’ inability to ‘raise a round’ they had been counting on to cover their short-term operating costs. Ironically, if you had seen this startup’s social media posts you would have noted how they had been touting their rocketship-like growth trajectory by signing up tens of thousands of users. However, ‘vanity metrics’ like ‘users’ is not the same thing as ‘paying customers’. There is a distinct and important difference in this nuance.

The truth is that during the last few years, Kenya’s burgeoning ‘Silicon Savannah’ has seen more than its fair share of startups that have closed shop after failing to ‘raise a round’. The names include those that seemed too big to fail like Copia, LipaLater, SkyGarden, Sendy, Kune Foods, Marketforce, etc. The list seems to keep getting bigger every year. However, if you think about it, the failure rate for startups globally, and not just in Kenya, sits at an average of around 90%, meaning that its almost always a losing game until you get a winner that does it right.

For 20+ years I have been something of an old school entrepreneur when it comes to how I think a business should work in the context of startups in Kenya. I have done the grinding and had enough near-death business experiences as an entrepreneur to know that at the very heart of it, and in no uncertain terms, the best kind of startup is one that grows organically on the basis of acquiring enough paying customers in order to stay afloat instead of constantly trying to ‘raise a round’ as popularized by Silicon Valley startup legends.

This somewhat less sexy route of getting customers often requires startups to ‘sell’ using more conventional means like actually visiting customers in person and ‘pitching’ their products and services. It means keeping operating costs wafer thin whilst obsessing about top-line revenue growth and profit margins. It means wearing many hats and growing gradually over time to ensure you can actually become cash flow positive and eventually profitable. Yes, this looks and sounds boring but many of the biggest businesses in Kenya followed this approach to become the market leaders that they are today.

In my view, the problem that we have in Silicon Savannah is that we think we can ‘cut and paste’ what Silicon Valley startups do to become global behemoths. If you look at the origin stories of many of these startups you will find that the need to ‘raise a round’ is an essential as part of their formula for success. These startups are built to scale on the back of a seriously strong value proposition that solves a big enough market problem that has impressive returns should it actually take off.

So, in a nutshell, ‘raising a round’ is not the panacea for an unviable business model when at the end of the day what any viable business needs, whether it got a significant funding round, or not, is enough paying customers to cover its operating costs with a profit margin built-in. This may ultimately mean a smaller startup with modest revenues at inception, and slower growth, but over time, it can scale massively in this manner without succumbing to the allure of ‘raising a round’ that could completely destroy it.