Starting a new business can be an exciting journey, but it often requires financial support to turn ideas into reality. One of the crucial aspects of building a successful startup is attracting investors who believe in the vision of a company and are willing to provide the necessary funding.
However, with fierce competition and numerous startups vying for attention, it can be challenging to stand out from the crowd. Within the last two years, more than 25 startups in Kenya have announced full closure, with several others downsizing their staff and operations, due to lack of sufficient funding to sustain operations.
Investors will often look for opportunities in markets that have the potential for high returns on their investments. That is why markets such as Nigeria and Singapore have witnessed an unprecedented rise in investments within the last two years.
These markets offer startups incentives such as tax exemptions that enable them to get to profitability quickly and thus pay back investors their money promptly. In a similar way, providing subsidies for the formalisation of startups, tax breaks and credit guarantee schemes to de-risk lending to startups could help to attract more funding into Kenya’s startup ecosystem.
Establishing stronger linkages between the universities where ideas come from and the startup ecosystem will also enable researchers and scholars to easily access funding in the form of grants or equities to actualise their ideas.
Boosting the capacity of young founders and upskilling tech talents by exposing them to programmes where they can receive mentorship from more experienced founders, could also help to attract more investments. Some investors have reported that they are forced to import skills in areas such as artificial intelligence that require specialised talent to implement.
Addressing the high costs related to obtaining patents, copyrights and trademarks that are needed to protect inventions could also be a timely intervention to spur investments.
In more developed economies such as the USA, China, and parts of Europe, it is very easy to get patents for anything that is innovative, because the government is aware that such products could be revolutionary.
To get a patent in Kenya, however, an innovator has to pay a filing fee, a publication fee due after 18 months from the filing date, an examination fee due within three years from the filing date, and a grant fee due once the patent has been accepted for grant.
Meanwhile, to secure a trademark, one has to pay for a search to ascertain whether your trademark, brand name, logo, signature or slogan is already registered by another entity. Once you have carried out a search, you pay for registration, advertisement, and registration again.
Worth noting is that it also takes very long to process some of these Intellectual properties. What this of course does is that it delays an innovator from introducing their product to the market. If they do that before the patent is ready, they risk having their ideas duplicated with nothing to help them get compensation for infringement of their intellectual property.
Enactment of the Startup Bill 2022, which has been in the Senate since 2021, will also facilitate the growth of startups through the protection of their intellectual property rights, among others.
The writer is a Partner in Deals and Strategy at KPMG.
