The Startup Bill, was established to provide a framework to encourage entrepreneurship in Kenya as well as to stimulate growth and sustainable development of technology with a goal of attracting Kenyan talent and capital.
Because of its technological advancements in infrastructure and growing numbers of international and local investors in the country, Kenya is considered to be one of the leading hubs of startups in Africa.
Kenya National Innovation Agency
The Bill proposes to establish a Kenya National Innovation Agency which will be responsible for the registration of startups. The agency will be tasked with formulating an incubation policy framework for the development of startups, both at national and county level, as well as creating partnerships between local and international business incubators.
Availability of the incubation programmes, both at the national and county level, is expected to create and develop a sustainable and globally competitive technology innovation sector that will contribute to the growth of the economy.
The Bill empowers the agency to subsidise the formation of startups; facilitate the protection of intellectual property of innovations by startups; provide fiscal and non-fiscal support to startups admitted into incubation programmes; and provide support to enable development and growth of startups.
In addition, the Bill provides for the establishment of a credit guarantee scheme for the development and growth of startups. If established, the main objective will be to provide accessible financial support.
Who can register as a startup?
Under the Bill, an entity is eligible to be registered as a startup and be admitted into an incubation programme if the entity:
- is registered in Kenya and the ownership is at least one third Kenyan;
- is newly registered or has been in existence for no more than seven years from enactment of the Bill;
- is involved in innovation, development, production and commercialisation of innovative products, processes or services;
- has its headquarters or a branch in Kenya; and
- can attribute 15% of its expenses to research and development.
An entity is not be eligible to be registered as a startup if it is established as a result of a split, reconstruction, merger or reconstitution of an existing business or if it is a holding company or subsidiary of an existing entity that is not registered as a startup.
Drawbacks and gaps
While the Bill aims at fostering an environment for innovation, growth and development and is a welcome step to acknowledging the need for regulatory framework relating to startups, there are some gaps and grey areas that exist.
The Bill complicates the registration process by requiring that an entity first register as either a company, partnership, limited liability partnership or non-governmental organisation after which the entity will be eligible for registration as a startup. This means that an entity will go through a process of double registration which neither simplifies the process nor reduces the cost of setting up a start-up.
In addition, the Bill disregards that the requirement for a start-up to have a patent or trademark registered in Kenya may result in exclusion of entities as most start-ups do not have enough capital to fulfil this condition.
Lastly, the one third local rule could have a negative impact on the economy as it may force foreign investors to look elsewhere.
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