Copy and pasting of business ideas or products has been cited as one of the factors weakening Kenya’s start-up eco-system.
The study has also found that there is plenty of duplication of programmes in the start-up space causing funds to be thinly spread.
This is in addition to the country’s election cycle which the study lists as a disruptor for start-ups as it waters down their progress.
The study titled Understanding Startups Eco-system in Kenya: Drivers, Challenges, and Opportunities note that despite the notable growth of the start-up eco-system in Kenya in the last ten years, it has not happened without challenges.
Some of the challenges include low participation of women and girls, inadequate capacity for manufacturing and prototyping, inadequate access to risk capital, weak start-up culture, and me-too types of businesses.
Cambridge dictionary describes a me-too product (business) as the kind that is designed to be similar to another product made by a different company.
There is also lack of human resources with adequate skills and experiences, lack of robust monitoring, evaluation and learning system, unfair competition, high taxes, inadequate policies, lack of consistency of standardisation of products, and proper information on where to get support for start-ups.
The July 2022 study also adds that the startup eco-system in the country is marred with bureaucracy in government agencies, election cycles which distort start-up activities, lack of commitment and patience from Micro, Small, and Medium Enterprises (MSMEs).
The study was published in the Journal of Business and Management Sciences in detail and in its conclusion, details that the government’s attempts to address start-up eco-system challenges so far have not addressed key issues around start-ups.
“The national government should provide matching funds (risk capital) to contributions by foundations, philanthropists, and companies as a way of minimising risk capital associated with start-ups during their early phases,” reads the study in part.
The study notes that while Kenya enjoys more ease of doing business with a ranking of 61 globally, the start-up sector however is disjointed.
“The Kenyan start-up eco-system has become disjointed with a lot of replications across the board,” the study reads.
It adds that public and private sector actors are quick to set up new hubs and programmes without taking full advantage of already existing infrastructure and resources.
“Opportunities for collaboration are bypassed in favour of duplication of programmes and consequently, funds that should ultimately support entrepreneurs are spread thin,” it says.
This study confirms an earlier survey released in February this year which showed that the majority of Kenyan SME business ideas were not original.
Disparity in business activity
The survey dubbed Kenya Branding Report Card 2021 found that seven out of ten businesses were copy and paste. The reason why these businesses were thriving was that the previously existing ones were not meeting the demand.
The new study states that there is a heavy concentration of activity in Nairobi, leading to disparity within the country.
The institutionalisation of national innovations week, the study further notes, will provide start-ups with a national platform to pitch once a year and in so doing will attract local and or international investors with a private-government nexus is imperative.
“There is need for standardisation and decentralisation of innovation and incubation centres to be easily accessible countrywide that are well equipped and meet minimum standards,” the study reads.
This should have both the private and public sectors executing synchronised innovation programmes to eliminate duplication of funding and technical support and maximizing on both funding and technical assistance.
“A central database for start-ups should be built to facilitate monitoring and evaluation reporting, as well as the progress of the innovation eco-system activities,” the study adds as one of the solutions to the weak startup space.
The study also puts focus on the need for long-term sensitisation and awareness-building programmes on intellectual property rights among start-ups, with specific desired outputs and outcomes.
“Such programmes should put the industry at the forefront to realise Vision 2030’s goal of becoming a knowledge economy by 2030, a defined pathway focusing on start-ups arising from research institutions and innovation hubs is required,” it adds.
Increase in funding
The study does however note that in terms of financing, there has been an increase in funding in the start-up sector with angel investors showing more interest.
It underscores notable changes in the start-up eco-system which has seen a move from mainly foreign companies to local entrepreneurs raising financing citing Cellulant, Market Force and Pezesha, among others.
“This has led to more growth of angel investors such as Vban and Naiban,” it says.
This finance, unlike the tradition where it is concentrated among the white-collar type of start-ups, it has tricked down to the informal sector.
“In addition, there is also a shift in start-up to incorporating informal sector for example Twiga that included smallholder farmers in their value chain, Wasoko integrated small retailers into big corporate supply chains, Market force has integrated with informal sector, and Sendy integrated the motorbikes taxis (boda boda),” says the study.
“Further, the changes in the start-ups eco-system have affected positively Kenya’s development challenges, for example, Mkopa providing clean energy, Branch and other fintechs – on payments and lending leading to financial inclusion, Koko networks – energy among others,” it adds.
The study targeted startups across the 47 counties. A sample of 74 respondents filled the electronic survey and interviews were conducted with 50 start-up eco-system players.
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