Lack of business skills bog down ICT startups

Over the past few years ICT entrepreneurs have been forming companies to tap into the vast opportunities presented by the sector, which has been billed as the next big industry in Rwanda. However, most of the companies have ended up only on paper with no business forthcoming. Though the issue of IT startups failure is a global problem, experts blame local ICT entrepreneurs’ failure on poor business skills.
Innovators share ideas at kLab in Kacyiru, Kigali. IT developer are having problems to attract funders.
Innovators share ideas at kLab in Kacyiru, Kigali. IT developer are having problems to attract funders.

Over the past few years ICT entrepreneurs have been forming companies to tap into the vast opportunities presented by the sector, which has been billed as the next big industry in Rwanda. However, most of the companies have ended up only on paper with no business forthcoming. Though the issue of IT startups failure is a global problem, experts blame local ICT entrepreneurs’ failure on poor business skills.

“Most of them are fresh information technology graduates, so they have little or no business skills to market their innovations and attract funding,” says Martin Carlos Mwizerwa, the kLab acting director and also in charge of National ICT planning and co-ordination. 

Mwizerwa adds that though most of the ICT entrepreneurs have brilliant ideas, they lack the necessary business skills to pitch and market their ideas to potential investors.

“Most entrepreneurs fail to convince investors on the viability and profitability of the innovations for the investors to buy into their companies or fund them. Investors need to see more than just a brilliant idea; they need to see prospects of growth and return on their investments, which most of the ICT entrepreneurs can’t show,” Mwizerwa says.

Jovani Ntabgoba, a technical and vocational education training (TVET) consultant at the Private Sector Federation chamber of ICT, blames the high rate of ICT startups failure to working in isolation.

“When developing software or making an application, it is important to involve key stakeholders in the sector, which some developers don’t do. At the end of it, some of these companies develop great software or applications that cannot be used by anyone.”

Ntabgoba advises ICT developers to always ensure that whatever innovations they make can be readily used in the day-to-day activities of businesses or the pouplation.

“It would be a futile effort for one to build an android application for farmers when most of them don’t have access to Internet-enabled gadgets,” Ntabgoba notes.

“Interacting with the market to study its dynamics is very important for any developer, who wants to come up with problem-solving innovations. This means that the innovations can be readily accepted by the market,” Ntabgoba adds.

He also challenges ICT companies to conceptualise innovations that will create demand in the market.

“There are many applications or software that they could develop, but most ICT companies are stuck at web developing. The problem is that most technology savvy people can do this, putting them out of business. Others come up with solutions that have already been developed; few people are willing to invest in such projects, ” he explains.

Moussa Habineza, CEO of Khenz Limited, says because ICT is an enabler or tool to facilitate other sectors’ growth, it is at times held at the mercy of these industries’ willingness to adopt their solutions.

“The ICT sector has to work with other sectors. However, some businesses and sectors may be hesitant to adopt the innovations because they fear the cost involved in changing their structures,” Habineza points out.

“People should be encouraged to embrace new innovations in their daily lives and business operations to help the sector grow. Some organisations are afraid that people may lose their jobs as some of these applications will ease transactions. But according to recent research, a 10 per cent increase in digitalisation leads to an increase in GDP by 0.75 per capita and 1.02 per cent employment rate in Africa,” Ntabgoba points out.

Financing is also a huge challenge affecting startups, according to experts.

“Most of the technology companies are owned by fresh graduates, who lack capital. But running an ICT startup requires a lot of money that is hard to get if you don’t have security to secure a bank loan,” Habineza notes.

He adds that the ICT sector being very volatile and risky, the return on investment may not be certain, scaring away potential investors. “But soon we are hoping that will change with angel investors and crowd funding.”

However, Mwizerwa doesn’t consider the lack of capital a big challenge, saying the government funds impressive ICT startups.

“The government offers up to $50,000 (Rwf33.5m) to ICT firms that prove they are worth investing in. We also offer comfortable working space like kLab, with high Internet connectivity.”

Patrick Nsenga, the Microsoft students’ ambassador and an ICT entrepreneur, says most the entrepreneurs only look at the technical part of their solutions, but ignore the business aspect.

“Many developers don’t make their products financially appealing to target customers. It is time we understood that there is more to successful entrepreneurship than just coming up with solutions,” Nsenga counsels.

Developers have also cited the low penetration of smart phones as a challenge since most of them build android applications.

“Instead of looking at bigger problems, I think it would be wise to start with smaller issues that the owners of the companies have control over. Most of the companies have internal wrangles within their organisations which drag them down,” Mwizerwa points out. However, lack of business management skills is the main reason why most ICT startups fail to take off.”

Mwizerwa adds that about $300m has so far been invested in ICT-related projects this year, urging ICT firms to think outside the box and take advantage of the many opportunities in the sectors.

“We should be keen on developing applications and solutions that have universal applicability. It is time to think global.”

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