iProcure, an agritech enterprise based in Kenya that serves as a bridge linking distributors of agricultural products with manufacturers, has encountered financial difficulties, leading to its placement under administration as of April 26, 2024. The company’s inability to fulfill its financial obligations to creditors precipitated this development.
In response to the situation, the court has designated the advisory division of KPMG, a prominent audit and advisory firm, to take over the management of iProcure with the aim of rescuing the startup, which has previously received backing from Safaricom’s Spark Fund. The appointed administrator from KPMG is tasked with implementing measures to steer the company back to solvency and operational stability.
Should these recovery efforts prove unsuccessful, the next step would be to consider liquidating the company. Liquidation is viewed as the last option and would be undertaken to ensure that creditors are able to recover the money owed to them.
Makenzi Muthusi, a representative from KPMG Advisory Services, has been entrusted with the indefinite leadership of iProcure. In this capacity, Muthusi will oversee all aspects of the company’s business, including the management of its properties and the continuation of its operations. A critical part of the administrator’s responsibilities will be to address and process all claims made by creditors.
KPMG has issued a notice directing any entity with a financial claim against iProcure to formally submit their claim, accompanied by the necessary supporting documents, to the Administrator by May 14, 2024, for evaluation.
The notice further clarifies that the former directors of iProcure have been stripped of any power or authority to engage in any transactions or make decisions on behalf of the company. This shift in control is a direct consequence of the administration process.
In a separate development within the Kenyan agritech sector, another startup named Shamba Pride has successfully raised $3.7 million in a pre-Series A funding round. This injection of capital is intended to bolster Shamba Pride’s operational capabilities as it continues to grow and develop within the industry.
Stefano Carcoforo, Nicole Galletta, Patrick Wanjohi, and Bernard Maingi are the entrepreneurial quartet who established iProcure back in 2013. Their vision was to create a platform that would streamline the connection between suppliers and retailers, thereby facilitating the efficient distribution of agricultural inputs such as fertilizers.
Based in Nairobi, iProcure not only connects key players in the supply chain but also provides them with valuable services such as inventory management and access to credit facilities. These services are designed to enhance the efficiency and effectiveness of the agricultural sector’s distribution networks.
Throughout its operational history, iProcure has successfully attracted a significant amount of investment capital, totaling $17.2 million across five distinct funding rounds. This influx of funds was aimed at enhancing the company’s service offerings and enabling its expansion into various East African markets.
A notable milestone in iProcure’s fundraising journey was the substantial $10.2 million, which equated to approximately KSh 1.2 billion based on the exchange rates at that time, raised through Series B funding and conventional debt instruments in August 2022. This particular round of funding was earmarked for the company’s ambitious expansion into the Tanzanian market.
Prior to this, in March 2023, iProcure secured a $1.2 million investment from the United States Agency for International Development (USAID). This funding was part of a larger $5.1 million grant distributed by USAID among seven agricultural firms in Kenya, with the goal of bolstering food production in the region.
Despite these significant financial injections and the strategic support from investors, the reasons behind iProcure’s precarious financial state remain shrouded in uncertainty. Questions linger regarding the specifics of the company’s debt, the exact amount owed to creditors, and the factors that led to the apparent disconnect between its fundraising success and its long-term viability. The situation has left industry observers and stakeholders pondering the underlying causes of the startup’s challenges and the efficacy of the measures taken to ensure its sustainability.
The financial troubles plaguing iProcure have been further illuminated by revelations from a former employee, who confided in a Kenyan news outlet. According to this source, the company has been grappling with cash flow difficulties and a high rate of expenditure relative to its income, commonly referred to as a “burn rate.” These challenges are often symptomatic of deeper issues within a company, such as mismatches between revenue generation and operational costs, or aggressive expansion strategies that outpace the company’s ability to sustain them financially.
In an attempt to steer the company towards a more secure future, iProcure made a strategic management change in 2022 by bringing in Niraj Varia, who was previously a partner at Novastar Ventures, to take the helm as Group CEO. This move was likely intended to leverage Varia’s experience and expertise to navigate the company through its financial and operational challenges.
However, Varia’s tenure as CEO was relatively short-lived, as he departed from the role in 2023. When approached for a statement regarding the current situation at iProcure, Varia indicated that he had no additional insights beyond what has already been made available to the public.
As of now, iProcure itself has not issued any formal communication addressing the issues it faces. Nonetheless, the company’s court-appointed administrator, Makenzi Muthusi, has acknowledged the recent developments. Muthusi’s role as administrator involves taking control of the company’s affairs and making decisions aimed at either rescuing the business or, if necessary, proceeding with liquidation to settle debts with creditors.
The situation at iProcure serves as a cautionary tale of the complexities and risks inherent in the startup ecosystem, particularly in sectors like agritech where the balance between growth, investment, and sustainable operations is delicate and critical for long-term success. Stakeholders, including employees, investors, and creditors, will be closely monitoring the actions of the administrator and the outcomes of the administration process.
