BOTSWANA AND THE STARTUP ACT
Perhaps a background of where startup acts started?
Start-Up Acts are a relatively new approach to supporting entrepreneurship and reflect the intense interest in technology entrepreneurship and its potential to deliver significant employment, productivity and societal goals. The first Startup Act was developed in Italy earlier this decade and there have been a number subsequently developed (Argentina, India, Tunisia, Senegal and Ecuador under development).
There is a longer tradition of SME Laws around the world. These laws are quite varied in nature can include legal definitions of SMEs for statistical purposes, provide the legal authority for SME agencies and their potential activities, and enable particular support (e.g. government procurement), or underpin firm level support such as firm entry incentives, startup investor incentives, SME tax exemptions, innovation-focused tax incentives, public support to incubators, or specialized entrepreneur visas. Other countries also have legislatively based support for categories of companies that include start-ups (e.g. French Jeune entreprise innovante that provides various tax advantages). Start Up Acts are an additional framework policy to the various individual initiatives that exist to support new innovative businesses (that may themselves have a legislative basis) and can operate both as an umbrella and as an enabler.
1. Why do you think Botswana’s economy can excel through start ups?
For Botswana it’s about decoding the startup ecosystem- and gives evidence that tech Startups are key to Economic Recovery and either economic diversification. Our economies have transitioned to the information era, driven particularly by a fast-growing digital economy. For instance, tech startup ecosystems have created five of the ten largest public corporations in the world: Alphabet (Google), Amazon, Facebook, Alibaba and Tencent. That is without counting Apple and Microsoft, which although are considered tech companies, were created before the advent of the global startup revolution. In the past 80 years, no other sector has ever produced more than three of the top ten global corporations. Automotive, oil & gas, finances, telecom, computer and semiconductors: none of the potentially contending sectors did it. In addition, except for Google these tech giants started without tangible IP coming out of an R&D lab, and all of them grew because of disruptive business models like those arising from the millions of experiments that are the product of 2 startup ecosystems globally.
Here is why it key for Botswana as it has chosen the digital economy roadmap; firstly- last year, the global startup economy was valued at $2.8 trillion and growing over 10 percent per year, about three to four times faster than the rest of our economies. Second; with the world’s transition to a digital economy, technology startups and their ecosystems have become more important and the jobs they create more sustainable, because they are better adapted to our economic future. The current crisis has accelerated the digitization of the offline economy, making tech companies even more important. Third; Policy makers leading advanced startup ecosystems around the globe have spent far too much time and invested far too many resources to watch the COVID-19 crisis wash it all away. Finally; In the wake of the last crisis, startups contributed strongly to the economic recovery, hence technology ecosystem aggregators where formed in universities, by corporate institutions, hands of angels and private equity financiers and government allocating budget to innovation park in Gaborone and we have seen a rise of the startups such as MAgri,BSafe, ModiSar, Scantter, and so on, and all of these are models of startups created in Botswana by Batswana.
2. What is it that the government needs to do in order for Start Ups to thrive?
Knowing that the value and importance of saving startups for our economies is higher and the cost much lower than for SMEs, then the appropriate government goal for its startup ecosystems would be to save all or almost all the startups — like many did for SMEs. Our governments have invested enormous amount of capital to save our traditional businesses with a focus on Small and Medium Enterprises (SMEs) — an action absolutely needed to reduce the depth of the recession we are entering by preserving the economic fabric, supporting both demand and supply sides — the next question is how to save specific sectors for which the broader programs did not work very well. The answer is quite simple- unlock a new emerging sector called startup ecosystem. The current crisis is making tech companies even more important. As we write they are accelerating the digital transformation of a large portion of the offline economy, from restaurants to schools, and showing leadership by, for example, 3D printing or changing production lines to make parts for ventilators; or making remote work and e-learning accessible to a broader number of organizations. This crisis will only accelerate the world’s transition to a digital economy, making jobs created by tech startups more sustainable, as they are better adapted to our economic future. At the same time, an increasing portion of traditional jobs will be at risk of being lost in the next few years for the same reasons.
One other comment that has driven counterproductive decisions for startups is that “most startups will die anyway, so let’s just save the best ones.” That assertion is rooted in the misunderstanding of investment in startup ecosystems and startups specifically. As we demonstrated earlier through our bootcamps that showcase Innovative Disruptive Enterprises (IDEs), as a portfolio looking to be VC-backed startups at Series B, A, and Seed will offer a higher potential to produce economic growth and job creation in the short term. They have been selected and vetted by professional private investors and now need to be given larger amounts of capital that put them on a much faster growth path than boot-strapped startups. While the goal of the government in a normal recession should not be to save startups that venture investors do not invest in, the COVID crisis is not a normal recession. Many of the recently funded startups would have done well and may do well after the crisis, because of Government but this is not the way to launchpad a startup ecosystem. That assertion is rooted in the misunderstanding of investment in startup ecosystems and startups specifically. We need wealthy individuals and high-networth individuals — what we call Angel Investors to launch the support of startups. That is not a role for Government ! But others ofcourse say the first goal is to urgently inject capital to save 80 to 90 percent of gov-backed startups that are at risk. I don’t agree with Government as a solution to this…where are the angel investors and why cant they play their part as this country has many wealthy individuals who have the responsibility to invest in the future ideas which are startups.
3. Which countries in Africa and the world that Botswana can borrow a leaf from pertaining to start ups?
In Africa a conversation has emerged in countries such as Rwanda, Chad, South Africa and recently in Botswana about the same startup act law. Startup Acts are distinct from other legally based types of legislatively based support for SMEs in that they specifically target a particular type of SME, namely start-ups. Steve Blank defines a startup as a “temporary organization in search for a repeatable and scalable business model.”
· India — https://www.startupindia.gov.in/content/sih/en/faqs.html
· Argentina -Shttps://techcrunch.com/2017/06/21/argentinas-government-is-wooing-entrepreneurs-with-a-new-law/
· Italy — see below
· Tunisia — http://ventureburn.com/2018/05/tunisia-startup-act-20-measures/
4.Do you think Start Ups are the solution given the current Covid 19 pandemic challenges?
Yes absolutely they are, that’s why you have emerging startups like BSafe which is a local startup that has just been adopted by the Government of Botswana. It is one example of how startups are solution, and give founders such Martin Stimela who invented this solution confidence to develop more startups. I could also speak about Justice William who created the COVID-19 permit system, another startup founder who has shown capability to deliver innovation for the ecosystem as a champion. But here is the bigger picture, we need to design a policy structure that allows for rapid flow of money to save startups and their jobs, as many governments have done for SMEs. To paraphrase Reid Hoffman, an entrepreneur is someone who jumps off a cliff and builds a plane on the way down. But when markets collapse, startups cut costs rapidly to respond to changing context. So in summary, if the government money does not flow to them in a matter of weeks, not months, the economy will be further not impacted by employee layoffs by startups while their power to drive economic recovery will be further diminished. Considering the speed with which startups have also delivered solutions, we need also need angel investors and wealthy individuals to come onboard faster with money so that that leaves no money to invest to “save” more startups — let alone achieve the government’s objective to save most startups, and with them the startup ecosystem, its economic recovery, jobs, local talent pool, etc
5. Any other relevant information is welcome
The incentive of the government must not be different so it must structure its policy in a new way, to align the incentives of the startups and investors. These typical SME support programs might not meet the goal we proposed for startups. What makes startups resilient and powerful engines of economic recovery is their great ability to rapidly adapt to changes and turn challenges into opportunities. If our programs are to be put to work for tech startups, an exception from these requirements must be granted- what I mean is that you need startups to instrument the startup act. Also, rather than having the government try to create a definition of tech startup, we have found that qualifying venture investor groups and startup support organizations instead allows for a more rapid qualification of many startups. Government money must be funneled to startups through angel investors and consequently to startups- Co-investment, matching program where the government follows a private investor.
About Us: NGWANA AFRICA
The Ngwana Africa Accelerator is Botswana’s first and only pre-seed startup accelerator. Since 2011, we have helped over 1200 +entrepreneurs get the first focus and support needed to build a technology business that matter. We help pre-seed entrepreneurs and teams build get to traction and funding by establishing a critical support network of local startup experts that are invested in their success and by providing a structured & challenging business building process. We have enabled tech entrepreneurs in Botswana and beyond to raise funding, get into seed accelerators, generate traction, put together teams, build a product, transition from employee to entrepreneur and more. We operate in Botswana and Rwanda.
By: Mooketsi Bennedict Tekere
Chief of Startups
