Start-ups can loosely be defined as a team of entrepreneurs developing new innovations for fast growth and maximum impact.
Today, start-ups have been at the forefront of technological development and value creation. With most starting with minimum resources and small teams, they have grown to have a profound impact on a global scale. A stark demonstration of this would be the fact that the list of top brands globally is dominated by technology companies that began as start-ups.
Governments around the world have realised the value of encouraging start-ups, the oldest coming from Silicon Valley. Other nations such as Israel and Singapore have also developed into hubs of innovation and development.
Therefore, it is important to identify the government’s role in encouraging start-ups from the lessons of successful areas.
The government approach to start-ups should be two-pronged: creation of a conducive environment and direct investment and intervention.
In his book, Boulevard of Broken Dreams, Josh Lerner notes that the great hubs of entrepreneurial activity places such as Silicon Valley, Singapore, Tel Aviv, Bangalore, and China’s Guangdong and Zhejiang provinces, the government was crucial to creating and supporting their growth and development.
While the Kenyan government has made steps towards creating an environment conducive to the investment and growth, these efforts either delay or fail.
An example of this would be the much celebrated Konza techno-city that six years later has very little progress to show for it.
In addition, the government must ensure that its policies, laws, and regulations facilitate growth and development through strategies such as improved quality of technological education, tax incentives, and ease of entry into the technology sector in the nation.
Furthermore, it is the role of the government to encourage research and development through measures such as tax credits that have been effective for small and medium enterprises (SMEs) in nations such as the UK, Canada, France, and the US.
In terms of direct investment by the government, this is a dicey proposition considering corruption in Kenya and likelihood of loss of public funds through investment in dubious areas guided by cronyism.
Nonetheless, start-ups in Kenya are solely lacking in funds with research indicating that lack of capital is the single largest constraint to business growth in Kenya.
Understandably, banks and other credit institutions are wary of investing in new enterprises due to lack of security and their risky nature.
This, in turn, creates an opportunity for the government to fill by providing the funding for the start-ups at the beginning.
Companies such as Amazon, Google, Apple, and Microsoft started in garages only to gain investments facilitating their growth and are currently worth billions and trillions of shillings, who knows how many Kenyan start-ups have died in their infancy due to a lack of funding?
Muiruri Wanyoike via email