Despite efforts to enhance the performance of local start-ups within the eco-system of Rwanda’s ICT sector, resilience remains fairly low, government figures show.
According to the Ministry of Trade and Industry, 98 per cent of businesses are considered SMEs, contributing 41 per cent of all private-sector jobs.
However, most of them collapse before their fifth anniversary due to challenges related to macroeconomic factors, business environment, growth opportunities, and historical determinants.
A survey carried out by the same ministry in 2016, highlighted lack of raw materials, sufficient working capital, limited market and lack of skilled labour being the major challenges faced by SMEs.
Since then, the government, through its various institutions and stakeholders, has come up with various programs to help SMEs improve their business operations.
One of the programs has been the concept of incubation hubs to help tech-oriented entrepreneurs and young innovators nature their ideas and turn them into viable and scalable businesses.
However, the initiative has left a number of incubated projects hanging in doubt as they fail to succeed after the incubation phase.
Only a few local start-ups have sustained their market, such as AC Group, DM HeHe, Hexakomb, among others.
Needless to mention, the majority of start-ups incubated in hubs such as kLab, have not survived the sector.
A new approach in progress.
Speaking to The New Times, Charles Shyaka, General Manager of 250 Startups, a local hub aiming at nurturing over 100 companies projected to be worth $50 million by 2025, said hubs have to do more than just providing an idea enabling environment.
Giving an example of the 250 Startups that have a long term approach since a startup is incubated for 6 months, and followed up for three to five years depending on the company model and line of business.
Within that period, a startup is equipped with profound analysis, raw feedback from different sources, and clientele base among others, product development skills, customer validation, and global contextualization of their project.
“One thing that we have tried to change in many innovators’ minds is to think beyond the country’s market size, so we organize study trips to one African country and another outside the continent for the five best startups exposing them to think globally,” Shyaka explained.
He added that it has been a success because some startups have already inked international deals.
Shyaka reiterated that innovation hubs have to involve third parties in their eco-system such as consulting firms to help with legal documentation, financial outlets, for better establishment of business models.
Kelvin Odoobo, Chief Executive and founder of Shambapro, an agri-tech the business still in incubation hub, said that the hubs have helped innovators from prototyping to a viable business ready to make sales.
“I think incubations should create an environment that would enable innovators work on their ideas until they record their first sale” he said.
He added that incubation hubs have to facilitate innovators to meet the intended market, get raw feedback so that they can be able to nurture more of their solutions that are assured of demand.
Odoobo, also said that during the incubation phase, it was very important for innovators to meet with investors so that they can understand, the latter’s needs and work on them so that they do not face any financial challenge once they leave the hub.
He, however, thinks that one mistake innovators make is the desire to own the company solely. He advised them to first work on putting in place structures and that way they will be able to convince investors with seed capital.
“One thing innovators have to know is that investors and banks will always ask who is in your team and how you share responsibilities” he added.
Life after incubation phase
Ernest Kayinamura, Founder and Chief Executive Officer, HexaKomb, one of the IT startup pioneers in the country, said that innovators have to do more market research so that they can craft well-tailored ideas able to solve major problems, they identified during the survey.
“Innovators have to first understand the market they intend to serve, if they pass that, then making money will be easy once they leave the incubation” he said.
Further reporting by Simon Peter Kaliisa