Kune Food has closed shop, but many people have been asking: how did the startup get here, bearing in mind that Kenya, especially Nairobi, is a lucrative market that has seen the success of tens and tens of other startups, and is still attractive to incoming companies, tech-based or otherwise?
Kune had an idea, and it set its base locally. Through CEO Robin Reecht, they granted an interview with TechCrunch during the pre-seed fundraising, which did not go as expected because Kenyans were offended by what the startup’s co-founder said.
To jog your memory, the firm netted a pre-seed funding amount of more than KES 100 million. This was, and still is a substantial amount for a company that was started less than six months at the time of the round. The funds were raised by Launch Africa Ventures, which also included other members such as Consonance and Century Oak Capital GmbH.
According to the CEO, Kune was started because he had arrived in Kenya, and couldn’t get ‘great food at a cheap price’ and that everybody told him it was impossible. This was obviously a false statement.
He also added that while people could make food orders in Nairobi, the meals were just of poor quality. This statement irked a lot of locals, and you can start seeing why the company found itself in a PR nightmare even before it could turn a year old.
Still, Kune was given a pass because it had raised substantial funds and had the potential to change the game with new ideas about food deliveries to Nairobians.
We should also note that economies of scale are one of the most key features of a startup: being in a city that has accommodated successful tech companies, it should be fairly manageable to expand a business.
We also understand that a startup can receive a lot of love and great leadership and turn profitable over a short period. It may also fail based on many other factors, including the strategies it chooses to explore in the market.
The Kenyan market, or in this case, the Nairobi metropolitan market is growing, and we have seen many global brands set shop in the city just because it is that attractive.
And while Kenya is not the very best in terms of legislation friendliness, it hasn’t stopped tech startups from thriving. There are many opportunities for growth because, and to stay ahead of the competition, firms have been forced to innovate and offer a unique services.
This, I think, is where Kune failed. It didn’t bring a new approach to the table for food deliveries.
For instance, Kune had issued this statement: Once launched, the company will build its own fleet of 100 electric motorcycles by early 2022. In addition, there are plans to hire 100 female drivers.
There was absolutely nothing new with the model because restaurants in the city and the outskirts had and are still running their operations using the same models, especially when they were closed at the peak of the COVID-19 pandemic.
The company event went ahead to state that Kenya does not have culinary shows: In Kenya, we don’t have any culinary shows. So, we are going to take that position as the culinary major of Kenya, and how do you create this? By creating amazing content, which we plan to do by creating videos and writing articles on how to cook or maybe just food business in general.
There are also other concerns, which were brought to light sometime in May this year. While we cannot corroborate them, they have since been echoed widely on social media channels, implying that there is some truth to them, and mainly following the announcement that Kune was closing shop.
First, the concerns revealed that the company fired more than 70 percent of its workforce. The excuse? That the Ukraine war had made it difficult for Kune to raise cash.
Remember, it had raised USD 1 million in mid-2021, so how fast did it burn through that cash? Word has it that Kune was spending up to KES 19 million per month. It is also said that directors were being paid extremely high salaries that the firm couldn’t maintain.
Another issue is that Kune picked poor strategies, one of which included the creation of a giga kitchen that could make 5K meals per day. Apparently, Kune overestimated delivery demands, and could hardly do 1K deliveries in a day.
Still, they managed to expand their portfolio by listing meals on logistics platforms such as Glovo, Jumia Food, and UberEats.
It got so bad that employees were asked to take pay cuts or just leave Kune. In some cases, they started selling their assets, including laptops just for payroll.
The official statement is that Kune was a subject of an economic downturn, a low investment that led to difficulties in raising additional funds, and the rise in food prices.
“With the current economic downturn and investment markets tightening up, we were unable to raise our next round. Coupled with rising food costs deteriorating our margins, we just couldn’t keep going,” said CEO Robin.
It would make sense why the company didn’t manage to get Round B of funds because VCs mainly invest in sectors with high potential for growth, and Kune wasn’t that.
It should also be remembered that VCs are interested in earning profits and high revenues from their investment. If profits cannot be determined, then a startup will very likely receive zero interest from VCs.
On the whole, bad PR at the start of Kune Food may have turned some people away from the company. Let’s not forget that there is a possibility that the firm mismanaged its first round of funds, and it failed to improve users’ satisfaction levels by misunderstanding their expectations.
These failures, however, should remind other incoming food delivery startups that the market is brutal, but has a lot of opportunities that, thanks to the penetration of the technology that is always thriving, will offer great chances of revenue.