Kenyan start-ups must aim at joining Scale-Up clubs

Paul Kinuthia is a rare breed.  The story of how he turned a backstreet downtown business in Nairobi,  InterConsumer Products, into a global force, scaling the Business Daily’s Top 100 SMEs Survey along the way, is the stuff of Kenyan legend.

His Nice & Lovely shampoo, helped to drive a deal worth some Sh1.5 billion, when cosmetics giant, L’Oreal, bought part of his business in 2013.

A man who started his business in unglamorous Kariobangi and Gikomba, with a capital of just Sh3,000, belongs to a privileged institution that every entrepreneur across the country should want entry to: the Scale-Up Club.

In just a few weeks time, I will line up alongside a stellar list of entrepreneurs: Vivian Mimano, founder and executive vice chair of Armada Human Capital, having started and run five successful start-ups.

Julian Kyula, co-founder and group CEO of MODE Group, a Fintech company with presence in 28 countries, will join us. 

And Entrepreneurs Boot Camp founder, Eric Kinoti, an SME award-winner after growing his business, Shades Systems (EA) Ltd, into a regional leader, will also be there.

What will be on the tip of everyone’s tongue, however, will not be the phrase that has peppered the vernacular of every Nairobi would-be entrepreneurial hopeful — start-up —but one that needs to be driven into their very waking moment: scale-up.

Remember that two-syllable phrase and, if you’re an entrepreneur with your eyes on the ultimate prize — legacy-building; changing a nation — you won’t go far wrong.

Because it is those Kenyan businesses that scale-up that will differentiate themselves. It is those Kenyan entrepreneurs whose watchword is scale-up that will stand the test of time.

Top of the agenda will be mentoring Kenya’s future entrepreneurial stars. They are out there: just look at the likes of Vivian, Julian and Eric. And there are many more.

I’ll add my two shillings worth, too, as I have learnt lessons throughout my 15-year entrepreneurial career. There are predators and sharks and leeches out there.

But there are also those who believe in a better tomorrow. A better Kenya. Those who believe in collective prosperity:  a mantra that I like to share wherever I go.

Because the facts state that, whilst there are positive signs, we need to up our game. Put another way: “Yes we can, but we need to pull ourselves together.”  

For those businesses that make it to the elusive land of SME status, they will then face an even greater challenge: how to scale still further to become a multi-national?

They cannot do it alone, however. The will to win will take you only so far. This is where Government needs to step in and buttress a new supportive policy, legal and process framework, which the private sector will in turn support with an appetite for innovation.

Kenya is following a growth path that will result in more employment and more capital, but creating a trajectory that will create more innovation and boost productivity requires a top-down approach.

As I beat the drum of scaling-up, rather than starting up, recently at a Presidential Roundtable, with Cabinet and principal secretaries around the room, the question on everyone’s lips was: can Kenya do what Singapore, the UK and Germany have all done before it? Sure we can.

But look at what they have achieved: Singapore with a population of 5.4 million: SMEs make up 99 per cent of their economy, contribute 50 per cent of GDP and 70 per cent of the workforce.

Look, too, at Germany — that bastion of steely efficiency which has transformed into the bedrock of the European economy, where 99.95 per cent of businesses are SMEs; they contribute 75 per cent to GDP and make up 78 per cent of the workforce.

In the UK, 5.2 million SMEs contribute an incredible, and eye-watering £3.5 trillion (Sh538 trillion). That’s the power of the SME and it is Kenya’s, and so many other emerging markets, “missing middle”. We have a lot of catching up to do.

At the centre of this conversation, will be the entrepreneur. This has become a trendy word and the story of the trials and tribulations, rather than the quick riches, needs to be distilled to everyone who wants to claim to be one.

Entrepreneurial ecosystem

Go and speak to Mr Kinuthia and ask him about the days when business was slow. It’s not all headline-grabbing news stories about mergers and acquisitions.

In my position as ICT Sector chair for the Kenya Private Sector Alliance (Kepsa), I am driving a conversation around building an entrepreneurial ecosystem. One of the prevailing reasons so many entrepreneurs fail, is doing so in isolation.

This ecosystem will require state and private sector input: there will be so-called ‘personal enablers’, where entrepreneurs educate themselves informally and formally and seek advice of mentors.

 Throw in financial enablers, such as micro-and-SME finance, equity investors, banks and Government support. This will be complemented by ‘business enablers’, which include incubators such as NaiLab and iHub, professional services and networking associations.

And then there are the ‘environment enablers’, such as support from the media and lobby groups.

Creativity and success doesn’t happen in isolation. Everyone wants overnight success; the accolades and the awards ceremonies.
 But, the truth is, starting-up a business is very hard work. Scaling that business is even harder.

But Mr Kinuthia’s story is enough to inspire those entrepreneurs who will meet and join me and others in Lake Naivasha this weekend.

The slogan of the boot camp is: “Dream Big. Start Small. Start now. Scale Fast.” It’s this last which really encapsulates the proof in the pudding.

Sure, starting-up is key but it is those who scale that will stand the test of time.  This is why sharing experiences is vital. Collective prosperity, rather than individual glory, is what will make Kenya a globally competitive nation.

Mr Macharia is founder and Group CEO of Seven Seas Technologies.