By Matthew Magare

The Startup Bill 2020 is before the Senate. The objective of the proposed law is to provide a framework to encourage growth and foster a favourable environment for startups.

The Bill envisions the creation of a Registrar of Startups. The Registrar shall maintain a database of startups indicating their ownership, stage of development, products/services offered, investment received, amongst others. The Bill recognises both for-profit companies and not for profits as startups.

The Bill also seeks to register incubators. The Bill defines an incubator as an entity whose principal object is to support the establishment and development of innovative startups. It should have in place facilities and adequate equipment to support such activity.

The Bill sets out a framework of incentives for startups. These include

1) subsidies in the formalisation of startups

2) facilitate the protection of intellectual property, and

3) provide research and development support to startups.

The Bill also envisions creating a credit guarantee scheme to guarantee investors in startups and provide accessible financial support. Similarly, under section 32 of the Science, Technology and Innovation Act, the National Research Fund is to facilitate the objectives set out under the Bill.

Our take

Innovative, scalable startups provide massive opportunities for economic growth. There has been a shortage of options for private sector funding for early-stage startups. Early-stage ventures are fraught with high levels of risk. Besides funding, startups require technical assistance. This assistance is a vital ingredient for startup success, has been lacking. Private sector initiatives have stood to fill the gap. Safaricom PLC  set up Safaricom Spark Fund to provide investment to startups. KCB Group established the 2jiajiri program to provide both training and investment to entrepreneurs. The government’s proposed intervention through the Bill is laudable.

Notably, the negative impact of COVID – 19 has seen a massive upsurge in loss of employment with a concomitant upsurge in the registration of new businesses as laid-off employees try their hand at entrepreneurship. In our view, the Bill should target barriers to the ease of doing business and offer tax and regulatory concessions for startups. A predictable and favourable regulatory environment will inevitably attract private investors and facilitate startups’ required funding and support.