The Swiss Startup Association (SSA) went to Berlin last week to visit re:publica, one of the biggest conferences on internet and society. The Global Innovation Gathering (GIG) is a sub-conference developed by re:publica They especially represent people from Asia, Africa and Latin America. On a panel, we discussed policy frameworks for startups in these regions.
As part of this year’s re:publica conference in Berlin, one of the biggest digital and internet conventions in Europe, the Global Innovation Gathering (GIG) discussed the shortcomings of policy frameworks for innovation and entrepreneurship. GIG represents and fosters global innovation ecosystems by enabling conversations and exchange between startups, entrepreneurs and innovation hubs all over the globe. GIG is a growing network of hub managers, makers, founders, and researchers and is shaped by innovators and perspectives from the Global South, especially Africa, South America and Southeast Asia.
Pain points for startups
In a panel during re:publica, three representatives from GIG presented the pain points faced by startups and entrepreneurs all over the globe, and discussed approaches for resolving them. From a Western point of view, it was quite interesting to note that the overall challenges concerning taxes or bureaucracy are similar worldwide, although there are some differences in the detail. For example, in Colombia the taxes are not an issue for entrepreneurs, but the import of electronic goods is problematic due to the high import tax rates declared by the state.
Also in Kenya, the import tax rate is 17 percent for hardware, which is a big issue for entrepreneurs like Nanjira Sambuli from iHub in Nairobi. She is running a hackerspace in the capital, and it is a real struggle for her to pay this fee. In the Philippines, the taxes are also high, claims Jay Fajardo from the accelerator Launchgarage. Also when there are incentives from the Philippine government for entrepreneurs in the field for ICT startups, it becomes a cost factor the government and entrepreneurs.
„The intentions are good but the execution blows up“, says Fajardo. In the Global South, the status of startups is again different to Western countries which makes it challenging for entrepreneurs to develop a model together with authorities. „There is big need to sit at a table and explain that these tax regimes do not work to build up a startup“, Sambuli says during the panel. In Colombia however, the taxes for imported electronics are really low, explains mobile entrepreneur Martin Restrepo.
Incorporations seem easy but involve a lot of paperwork
Incorporating a startup in Brazil can take almost a year, says entrepreneur Georgia Nicolau from Sao Paolo. „That is way too long. In a year, most startups are already dead“. The incorporation process also seems inconsistent throughout. Other startups from Brazil can incorporate within two days. Philippine expert Jay Fajardo says: „It is a universal problem that in some countries it takes too long to start a company. On paper, it is possible to start a company in the Philippines in two days, but in the end, it takes a month to fill up all the paperwork“. And he warns: “When the policy is not working for the needs of startups, they incorporate in other countries like Singapore”. Sambuli adds that in Kenya big companies have more benefits in term of taxes or incorporation than startups. Again, in Colombia you can build a company in two days, says Restrepo, who is running a grassroots social startup.
The representatives of Global Innovation Gathering also demand more flexible and institutional frameworks for startups worldwide. Especially in south countries like Kenya or Colombia, there is often the question of whether a startup is a social running NGO or scalable startup. „We need to work more on flexibility. Not only in terms of legal framework but also in the resources you need“, claims Restrepo. As an example, he talks about SMS-services from his own social mobile startup.
Shaking hands with politicians
How can governments in the Global South work together with startups, FabLabs, co-working spaces and entrepreneurs? Jay Fajardo mentioned a young senator in the Philippines who is trying to bring a startup bill to law. „I am not a supporter of roadmap papers from governments because they are not flexible enough. A solution can only be created when all stakeholders work together, and not just based on what the government thinks startups might need“, Fajardo says. „You have to engage with politicians! We need more lobbying for startups with the policy makers“, says Nanjira Sambuli.
This leads to the idea that startups should not only join together within their own country, through an association such as the Swiss Startup Association in Switzerland, but should also be connected globally. The challenges for startups are the same in many countries worldwide. But the discussion is not just about regulations and policy frameworks. The bigger challenge is still to create an awareness of startups and entrepreneurship among governments and policy makers.