eBusiness Weekly
Nokuthula G Moyo-Muparuri
Two years ago, I wrote an article in the Business Weekly paper entitled “The design of a start-up ecosystem”. In the article, I discussed six design elements which are policy, finance, culture, support, human capital and market access.
The article further went on to discuss the building blocks of a start-up ecosystem, which include start-ups, talent, funding providers, incubators, accelerators, co-working spaces, service provider, supportive Government agencies, corporations, media and events. In the quest to design our own home grown start-up ecosystem, this article will go into detail on how we can start with the policy design.
Let me start by defining a start-up ecosystem. A start-up ecosystem is a network of people, investors, institutions and companies that work together to create an environment for start-ups to thrive. This network interacts as a system to create and scale new start-up companies.
Innovation ecosystem, entrepreneurial ecosystem, are terms that are used interchangeably with the start-up ecosystem.
Start-up ecosystem is more appealing than the other two, so that is why I prefer to discuss it as a start-up ecosystem, but basically it’s the same thing that is being referred to.
The reforms in the Higher Education sector, which added two more pillars from the original three which are teaching, research and community service, to then include innovation and industrialisation are focused on developing the start-up ecosystem (Education 5.0).
Developing the start-up ecosystem is actually the process of implementing the pillar on Innovation which then results in industrialisation.
Policy design
This is about designing policies that will enable the start-up to be able to thrive. At the centre of all the policies, is the start-up. Whatever policy is being crafted is about nurturing the start-up. Deliberate efforts are made to develop an enabling environment for start-ups.
The major question being asked is “what type of policies enable the development and growth of start-ups”.
Five policy design elements to be discussed are as follows: Developing a robust start-up policy, mobilising financial resources, easing regulatory frameworks, developing appropriate institutions and reforming institutions.
Developing a robust start-up policy
There is need to develop a robust start-up policy which includes four pillars, which are start-up infrastructure, fiscal support, regulatory easing and entrepreneurship development. The infrastructure pillar will be about addressing the appropriate infrastructure requirements for start-ups.
Fiscal support is about developing fiscal incentives for entrepreneurship support organisations such as incubators and accelerators as well as for the start-ups.
Regulatory Easing is about identifying regulatory hurdles for start-ups and then simplifying them so that start-ups can develop and grow.
Entrepreneurship development is how the Government will work with educational institutions, industry and civil society organisations in order to develop entrepreneurship.
Mobilising financial resources
Historically, Africa and Zimbabwe always focus on foreign countries to get resources, that is through Foreign Direct Investment (FDI).
There’s need for a mindset shift, by looking inwards to mobilise financial resources, that is through domestic investment. A point to note is that Zimbabwe is one of a few countries in Africa that has a majority of financial institutions being owned by locals.
This should make it easy for us as a country to mobilise resources locally for our start-ups. The Government needs to play a leading role in mobilising financial resources for start-ups.
This can be done by assessing how a proportion of the pension funds can be allocated for start-ups. Even the Stock Exchange can be used to mobilise resources for start-ups.
Easing regulatory frameworks
In developing a conducive business climate for start-ups, there is need to assess the business regulatory framework to check whether it is not a hindrance to the development and growth of start-ups. The first port of call is the company registration requirements.
Questions such as accessibility to start-ups, complexity of procedures and costs for the start-up need to be asked.
There is need to assess the bureaucratic hurdles and burden of tax compliance on start-ups, so as to develop a system which will be able to accommodate start-ups so that while they are complying, they are also facilitated to develop and grow.
Depending on the type of business, start-ups have to comply with a number of quality standards such as environmental, occupational safety and health requirements, technical standards, consumer protection standards, food and drug control standards.
Questions such as how do start-ups get the assistance to comply with the required quality standard need to be asked.
Standards are important for all business big or small as they make organisations to be competitive at national, regional and global markets. Even issues to do with industry and local authority licences need to be assessed in terms of their affordability to the start-ups.
Developing appropriate institutions
There is need to develop appropriate legislation and institutions for the Start-Up ecosystem to be established and be able to grow and thrive.
These organisations include Enterprise Support Organisations (ESOs), Knowledge/Technology Transfer Organisations, Science and Technology Parks for product/prototype development,
Developing legislation like the Bayh Dole Act of the United States, which enables universities and public research institutes to own, patent and commercialise inventions can be the first step. The legislation is meant to ensure that institutions generate licensing revenues and facilitate technology transfer.
Enterprise Support Organisations are meant to help current or aspiring entrepreneurs move closer to starting or growing viable businesses and to ensure their sustainability beyond five years.
Enterprise Support Organisations include incubators, accelerators, innovation hubs/spaces, co-working spaces, entrepreneurship institutes, networking and event facilitation organisations.
These organisations help start-ups keep a critical eye towards both the journey and the destination. They also create an enabling environment for entrepreneurs to thrive.
Technology transfer organisations are academic or commercial entities that facilitate intellectual property rights management and technology transfer by bridging the gap between research and practice.
They provide support for collaboration and mediate relationships between different innovation stakeholders, such as academia and industry.
There are various types of technology transfer organisations, such as: Technology Transfer Offices (TTOs), Technology and Innovation Support Centres (TISCs), Science and Technology Parks, technology incubators and intellectual property marketplaces.
Technology Transfer Offices (TTOs) are usually created within a university in order to manage its Intellectual Property (IP) assets and the transfer of knowledge and technology to industry.
Sometimes the mandate of TTOs with respect to collaborative research includes any interaction or contractual relation with the private sector.
Common names for such offices differ. Some examples include: Technology Licensing Office (TLO), Technology Management Office, Research Contracts and IP Services Office, Technology Transfer Interface, Industry Liaisons Office, Intellectual Property and Technology Management Office and Nucleus of Technological Innovation.
Technology and Innovation Support Centres (TISCs) help innovators access patent information, scientific and technical literature, search tools and databases and make more effective use of these resources to promote innovation, technology transfer, commercialisation and utilisation of technologies.
Technology business incubators (TBIs) are organisations that help start-up companies and individual entrepreneurs develop their businesses by providing a range of services, including training, brokering and financing. IP marketplaces are Internet-based platforms that allow innovators to connect with potential partners and/or clients.
Science and Technology Parks (STP) are territories usually affiliated with a university or a research institution, which accommodate and foster the growth of companies based therein through technology transfer and open innovation.
Reforming Institutions
A number of institutions need to be reformed in terms of aligning their role to ensure the development and growth of the start-up ecosystem.
The Government needs to reform the way in which it is playing its role for start-ups by ensuring that they provide appropriate leadership, developing a start-up policy, involving industry, civil society organisations and education institutions in the start-up ecosystem, allowing the growth of start-ups, and making the development of entrepreneurship activity a government priority.
There is need for funding organisations to develop funding mechanisms which are specially focused on start-ups.
These organisations play a crucial role in vitalising start-ups. They include financial institutions, incubators and accelerators, venture capital organisations, private equity organisations, angel investors among others.
A business incubator may be defined as an organisation which offers a range of business development services and access to small space on flexible terms, to meet the needs of new firms.
The package of services offered by a business incubator is designed to enhance the success and growth of new enterprises thus maximising their impact on economic development.
Accelerators are organisations that offer a range of support services to funding opportunities for start-ups. They tend to work by enrolling start-ups in months long programs that offer mentorship, office space and supply chain resources.
Incubators and accelerators offer similar services but they differ slightly in that Incubators are mainly focused on stimulating start-ups innovation by incubating disruptive ideas while accelerators on the other hand focus on accelerating the growth and scaling of a business.
Incubator and accelerator programmes help start-ups succeed by providing mentorship, guidance, training, strategy, and partnerships, research and development and funding.
They are instrumental in getting start-ups especially early stage ones, off the ground. Having access to accelerators/incubators resources and networks is necessary for the start-up to take off.
Venture capital is a form of private equity and a type of financing that investors provide to start-up companies and small businesses believed to have long term growth potential. Venture capital generally comes from well off investors, investment banks and any other financial institutions.
A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of start-up or operating companies through a variety of investment strategies.
Private equity is often grouped with venture capital as an alternative investment. Investors in this asset class are usually required to commit significant capital for years, which is why access to such investment is limited to institutions and individuals with high net worth.
An angel investor is a wealthy person who invests his or her own money in a company usually a start-up that is in the early stages of development.
Angel investors expect to take ownership positions in the companies they support because their capital is unsecured, they have no claim on the company’s assets.
The teaching and examining of entrepreneurship by education institutions have to be reformed from theoretical to practical, which involves learning by doing.
Student doing entrepreneurship modules can do a personal or team start-up project in which they are examined when they present their idea to a panel of judges.
Corporates can reform themselves by availing their expert knowledge thus providing advisory services and also mentor the start-ups in their start-up journey.
They can gain from the start-up through accessing a wealth of ideas, which can assist them to adopt some ideas thus becoming corporate entrepreneurs.
We have created a foreign investor friendly environment, but have not considered the same thing for our domestic investor who is the start-up.
One of the institutions to reform can be the Zimbabwe Investment Development Agency (ZIDA) so that it also includes the domestic investor. The institute provides bespoke or custom designed courses tailor made to capacitate business skills required by organisations.
In terms of start-up ecosystem development, the institute engages the network participants to collaborate in developing a vibrant and dynamic start-up ecosystem.
Nokuthula G Moyo-Muparuri is a lecturer at the Midlands State University in the Faculty of Business Sciences. She is also the founder of the Institute of Applied Entrepreneurship. The mission of the Institute is Business Skills Development and Start-Up. She has also authored 3 books and co-authored two books in the area of Business Law. You can contact her on +263718747621
