Kenya’s Startup Bill is waiting for Presidential assent and will provide a framework for innovation, support for startups and solidify Kenya as a global innovation hub. But startups that don’t meet its requirements will be excluded from registration and incubation programs.
Requirements for Startups
To be a startup under the proposed law you must:
- Be headquartered in Kenya: Your main office must be in the country.
- No distribution of profits: You shouldn’t distribute profits so that resources are reinvested for growth.
- Ownership: Must be 100% owned by one or more Kenyan citizens.
- Research focused: At least 15% of expenses must go towards research and development.
Startups that have been in existence for more than three years and those formed through mergers, acquisitions, splits or restructuring of existing companies are not eligible for registration or incubation under this bill.
New Incentives and Support
The bill has fiscal and non-fiscal incentives for startups, incubators and investors including:
- Tax reliefs, grants and subsidies to reduce the burden on startups.
- Government procurement opportunities to grow the business.
- Fast tracked intellectual property (IP) registration through the Kenya Industrial Property Institute to protect innovations.
The Kenya National Innovation Agency and Kenya Industrial Estates will also play a key role in innovation, creation of a national incubation framework and linking startups with universities and the private sector.
Startup Fund and Compliance
Startup Fund will be financed through government appropriations, grants and donations and will provide resources to eligible startups.
Registered startups will be required to comply with:
- Meet growth targets in human resource, assets and annual turnover.
- Keep proper accounts and submit financial statements.
- Inform the overseeing agency of any structural or operational changes.
Failure to comply with these requirements will result in deregistration after a compliance notice is issued.
Benefits to Kenya’s Startup Ecosystem
The bill will nurture the startup ecosystem through innovation and entrepreneurship support. Key highlights include:
- Fast track Innovation: By fast tracking IP registration and academia-industry collaboration.
- Young Innovators: Create a pathway for young entrepreneurs to turn ideas into sustainable businesses.
- Attract Investment: Offer fiscal incentives to investors and position Kenya as the innovation hub.
Irene Mayaka one of the proponents of the bill said the law will give young innovators opportunity to grow their ideas into businesses and make Kenya a global innovation leader.
Challenges for Startups
While the bill has many benefits, it also has challenges:
- Startups that are more than three years old or don’t meet research expenditure requirements will be excluded.
- The no distribution of profits rule will deter startups from seeking external investment from profit oriented venture capitalists.
Additionally, the compliance demands and stringent growth targets may create barriers for some startups.