South Africa-based fintech startup Wala, which hoped to roll out its own cryptocurrency across the continent, has closed after failing to secure the necessary funding to continue operations.
Founded in 2015, Wala initially provided access to transactional banking, remittances, loans and insurance, working with specialist providers to offer a full suite of financial services.
The startup became crypto-focused in 2017 with the launch of utility crypto-token Dala, which Wala hoped would support the operationalisation and further development of scalable, blockchain-enabled financial platforms for emerging markets. It did this by raising funding from Newtown Partners, and then bagged US$1.2 million in addition through a token sale.
Initially, it went well. Wala, which won the Zambezi Prize late last year, secured over 150,000 users, mainly residing in Uganda, within months, but founder and chief executive officer (CEO) Tricia Martinez said it soon ran into problems.
“Rewards attracted scammers or people who figured out how to take advantage of a rewards system. This led us to change our rewards model multiple times and have to remove users who were abusing our system,” she said.
“The biggest problem we ran into was infrastructure. Our partners’ systems would regularly turn off due to internet problems or their own poor infrastructure, which meant our users were unable to transact, which was the biggest use case for Dala. This crushed our user engagement and most importantly trust in our system. It also forced us to expand the scope for Dala. We had to build even more infrastructure than we anticipated at the start.”
The main problem, however, and the one that has finally forced the business to close, was funding.
“We had little funding and limited resources while tackling a massive global problem. With over 150,000 Dala wallets and more and more partners wanting to work with us we had a lot on our plate with limited resources,” said Martinez.
However, when it became time to fundraise again, Wala was not successful, in spite of its team believing its rapid growth would make it attractive to investors.
“I began fundraising at the start of crypto winter, which certainly didn’t help. For whatever reason, not many investors wanted to back a crypto company, let alone a startup focused on African markets,” Martinez said.
“For eight months I travelled across the globe, pitching investors in blockchain, fintech, impact, African-focused… 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.”
Wala began cutting back, turning off deposits and laying off most of its team, but on June 24 it turned off its app entirely.
“Our team was devastated to say the least and our users were upset. We provided a free financial payments system to consumers that solved a huge problem for them, but we didn’t have the funding to scale operations and solve the infrastructure problems that existed in these markets,” said Martinez.