Thepeer, a fintech startup founded in 2021, concluded its operations in April 2024 and has recently completed the process of returning $357,960 to its investors as of June, marking the final chapter in the company’s brief history. This return of funds indicates that an angel investor who initially contributed $10,000 would have received a refund of $2,280.
The decision to shut down and refund investors was made by Thepeer’s founders, Michael Okoh and Chike Ononye, after determining that there was no viable path to scale the product. The founders chose to cease operations and move on to other ventures.
The closure of Thepeer raised questions among some angel investors, who sought clarity on the company’s financial status at the time of shutdown. They were particularly interested in understanding how the $2.1 million raised in a June 2022 seed round, which valued the company at $5 million, had been utilized. Reports indicated that Thepeer had only $450,000 remaining in the bank upon ceasing operations.
The founders clarified to early investors that, contrary to the funding announcement in July 2022, only $1.35 million had been received from that round. In the wake of the shutdown, there were reports in April that one investor had requested to audit the company’s accounts before the closure was finalized. However, a pre-seed investor, who chose to remain anonymous, revealed that no such audit took place.
While some investors were concerned about potential discrepancies in the accounts, others were content to dismiss any minor inconsistencies as negligible and preferred to put the matter behind them. Venture capital firms often opt for a non-confrontational approach in such situations to avoid public disputes with their portfolio companies.
The return of capital to investors comes after an unexpected shutdown, even though the company reportedly had enough funds to operate for another twenty months. This runway could have allowed the founders more time to experiment and potentially find a product-market fit, a common challenge for startups facing difficulties.
Other startups, such as Target Global-backed Kippa, have successfully pivoted from one industry to another, such as moving from fintech to edtech, after closing down a specific business line. Ononye explained that despite the appearance of a significant runway, projections indicated that the company would not be able to integrate its services with customers quickly enough to achieve the necessary scale and revenue.
Before deciding to shut down, Thepeer explored various options, including a potential buyout by larger companies to enhance returns, but aligning investor interests with those of the prospective acquirers proved challenging. The startup also considered pivoting to different verticals, such as fraud detection, the creator economy, and financial reporting. However, the founders ultimately decided against using investor funds for such a pivot, according to a source with direct knowledge of the situation.
Thepeer faced a “chicken and egg” dilemma, as its solution, which facilitated money transfers across different business wallets, required a significant number of businesses to integrate with its payment platform to be successful. Despite efforts, the startup struggled to convince businesses to adopt its payment gateway, given the availability of established options like Paystack and Flutterwave. Of the 82 businesses onboarded during Thepeer’s three-year lifespan, only a quarter were active, underscoring the challenge of adoption.
With a limited number of businesses on its platform, Thepeer was unable to achieve the transaction volume necessary for profitability. The startup generated less than $1,000 in revenue from over $500,000 processed in the first three quarters of 2023.
Regulatory compliance also posed a challenge for Thepeer, particularly when attempting to onboard enterprise businesses like banks, which could have provided the scale needed for survival. According to a source familiar with the matter, compliance issues and inconsistent support from well-regulated fintech partners hindered the startup’s progress.
Documents from October 2023 revealed Thepeer’s openness to being acquired by a licensed business that could facilitate the onboarding of enterprise clients, including banks.
Ononye acknowledged the difficulties of marketing a niche payment method in a market dominated by established payment methods like cards, transfers, and cash. A person close to the business mentioned the significant educational gap in what Thepeer was attempting to do and the startup’s lack of preparedness for such an undertaking.
For Thepeer to achieve market fit, it needed to alter customer behavior and promote wallet-to-wallet transactions, which would have required substantial investment. Fintechs like OPay and Moniepoint have only managed to change consumer behavior after significant capital injections.
Ononye reflected on the ambitious nature of Thepeer’s payment method, which was novel to the market, and admitted that the venture was always a gamble. The technical development, while crucial, was not sufficient on its own; more time and capital were needed than initially anticipated.
Another challenge for Thepeer was the labor-intensive process of integrating with each business. With a team of 10 employees, the startup found it difficult to onboard businesses rapidly enough. Each integration demanded hands-on engineering work due to the unique operational functions of each business, and there was a need to ensure a consistent customer experience across the different platforms.
