Tech
Coinbase-backed Mara lost $16 million in 2022 as management team disbanded
At the height of 2021’s crypto optimism, pundits argued that Africans needed to participate in the crypto economy, create products, and educate a continent of young people about a future that Web3 was sure to dominate. Such arguments led to the launch of startups like Mara (CoinMara Inc), a pan-African exchange that set out to “build Africa’s crypto economy.”
Founded by Chinyere ‘Chi’ Nnadi, Lucas Llinás Múnera, Kate Kallot, and Dearg OBartuin in 2021, Mara has been a hit with investors. In May 2022, it raised $23 million from Alameda Research, the trading arm of FTX, Coinbase Ventures, and 100 other investors at a pre-money valuation of $70 million.
In a stunning reversal of fortune that lasted just two years, Mara ran out of cash, with CEO Chineyere Nnadi filing for a new entity called Jara in early 2024. Two co-founders who left the company in early 2023 say Nnadi founded the new company, Jara, solely to avoid liability for Mara’s liabilities.
“Mara could have been something extraordinary, but its CEO led it down a dark and rotten path,” the co-founders said in a note to investors.
Chinyere Nnadi did not respond to multiple requests for comment for this article.
A promising start for Mara
With a lot of funding in 2022, Mara began building a cryptocurrency wallet and a layer 1 blockchain backed by Mara tokens. According to Mara’s management team, everything was on track when Mara Wallet launched in February 2023 with “4 million verified users.” The company also touted its user community earning Mara tokens to educate others about cryptocurrency.
Like many startups that raised money at the height of the Zero Interest Rate Phenomenon (ZIRP) in 2021, Mara burned through cash at an extraordinary rate, according to internal documents reviewed by TechCabal.
It lost $15.9 million in 2022, according to a copy of an audited financial statement sent to investors. It didn’t report revenue because it hadn’t yet launched a product in 2022, but expenses were already astronomical. Mara spent $9.1 million on salaries, bonuses and benefits. It had 130 employees, a person familiar with Mara’s operations said.
“We [paid high salaries] to attract talent [from well-paying companies like Apple and competitors like Yellow Card] but they haven’t always delivered on their promises,” Nnadi wrote in a report to investors, acknowledging the company’s cash burn during its growth phase.
With $5 million in cash available by the end of 2022, Mara has begun discussions to raise funds in 2023.
The inability to raise follow-on funding has made the problems worse.
Mara’s timing couldn’t have been worse. The demise of ZIRP and the crypto winter of 2023 have made it difficult to raise money. The departure of three of Mara’s co-founders effectively left Nnadi alone to run the company, and those departures have spooked investors, one person said.
Despite discussions with several investors about a possible fundraising of $2-5 million, nothing has materialized.
Without a fresh injection of cash, Mara’s financial problems worsened. By June 2023, Mara had cut the team doubled to save costs and seemed at risk of closure. One publication cited generous staff salaries and expensive marketing campaigns as major wastes of company resources.
Three people with direct knowledge of the situation said the company owed more than $3 million to vendors that provided technical services such as compliance and communications tools.
According to the communication seen by TechCabal, those creditors are considering filing for involuntary Chapter 8/11 bankruptcy against Mara.
Mara also encountered problems with her Mara Wallet, despite its claimed 4 million users.
“At least 75 percent of the 4 million verified users Mara reported having were fraudulent accounts,” a former executive said. “The financial incentive of the company’s referral program encouraged users to create fake Mara wallet accounts.”
Trapped by financial troubles and an unwelcome Mara Wallet, Nnadi registered a new cryptocurrency company called Jara. By April 2024, Mara was gone and in its place was Jara.
“Mara is no more,” reads a Telegram message from an anonymous community manager, who urged the nearly 10,000 users of the Mara Telegram group to download the new Jara app, a non-custodial crypto wallet. Users were told, “The company’s investors are aligned with the new vision.”
Coinbase Ventures, one of its largest investors, did not immediately respond to comments.
Nnadi offered to transfer capital from Mara’s institutional investors and tokenized shares from nearly 100 individual investors to Jara, two people familiar with the matter said. He also said he had invested $700,000 of his own funds in Jara, the people said.
The rebranding to Jara was done to move beyond the “poor engineering work of the past and be more authentic to the way Africans transact,” CEO Chinyere Nnadi told investors. In a separate memo, he also said that an employee hired to work on the over-the-counter trading product stole $600,000 from the company’s first OTC trade.
But former Mara executives have questions that could ruin Jara’s new start. They say Nnadi spent company funds with little oversight and question how the money was spent.
While the company’s 2022 financial statements showed that the directors earned a combined $2.6 million, it’s unclear how much Nnadi earned in salary. Of the five C-suite executives excluding Nnadi, three earned $170,000 each, a fourth earned $120,000, and another earned $600,000 annually. The combined earnings of those five executives were $1.23 million, suggesting that Nnadi, the only executive whose salary was not disclosed, may have earned as much as $1.3 million.
There are also questions about the $500,000 donated to the Mara Foundation, the startup’s nonprofit arm. “The Swiss government has formally initiated action against the Mara Foundation,” a former executive wrote to investors. TechCabal could not independently verify that claim.
At least two former executives also argue that the creation of Jara was a way to evade Mara’s accountability.
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