Cultivating Ethiopia's Startup Ecosystem

Startup ecosystems are rather cultivated than created, they flourish on their own using existing research and knowledge base, capital, environments that are influenced by existing assets such as market opportunity, historic and cultural legacy, regulatory incentives, geographic location and perhaps most importantly, from existing firms with a high growth potential that have developed local solutions and have a deep knowledge of the local context and needs.

The New Ethiopian government’s digitization strategy has resulted in the liberalization of the telecom sector, in ease of investment and doing business, and has put the private sector at the forefront of the country’s economic development. Ethiopia is experiencing progress in several areas that facilitate digital and digitally enabled growth. 2019 Nobel Peace Prize Winner Prime Minister Abiy Ahmed’s government is implementing reforms in a number of sectors raging from privatization of several state-owned entities to upgrading of basic infrastructure including the power sector with a $20 billion investment. The recently restructured ministries of Innovation & Technology and Science & Higher Education as well as the two commissions of Investment and Jobs Creation, both directly under the Prime Minister’s Office are witnesses to the strong push of the government to create a technology driven and entrepreneurship led digital economy. Overall enrollment in higher education facilities in the country have also grown five-fold since 2005, with the previous government’s policy of training 70% of students in STEM resulting in a strong human capital base.

As the exponential progress and convergence of technology, ever increasing in performance and reducing in cost, it is clearly creating new opportunities to birth Ethiopia’s transformation in the digital era. Coming late to industrialization gives Ethiopia the opportunity to create a development model that places a high premium on its young population, and be based on a profound understanding of technology’s astounding progress and disruptive impact on global value chains. Ethiopia can not only to benefit from orders of magnitude of gain in effectiveness and efficiency in sectors such as infrastructure, energy and agriculture, but also to leapfrog directly into decentralized, personalized and digital modes of social services (finance, healthcare, commerce, education, government services, etc...), by cultivating a strong startup ecosystem.

Startup ecosystems generally arise from a core of established fundamental and applicative information-rich environment in which this information is both accessible and shared. This knowledge base is built upon research that comes, be it from government funded research centers, academia or R&D that is conducted by large established businesses. The presence of large businesses invigorate startup ecosystems as they contribute disproportionately to innovation and technology dissemination.

While Ethiopia does not have local large technology firms, it has high growth firms that have the potential to become the large companies of tomorrow with the proper incentives and regulatory environment. These high growth firms create their own ecosystems by fostering small-business creation through their supply chains and distribution networks and helping create businesses that build on top of their products and services through accelerator and incubator programs. They are also better able to attract foreign capital, which means they are much more likely to export their business outside of Ethiopia to other African countries, further creating jobs and generating revenue for Ethiopia from exported products and services, avoiding the cost of importing basic technology, and attracting investment and visibility for the country on the global stage.

Universities also play an important role in startup ecosystems. The most important contribution that universities make to a start-up community is its students who bring new ideas and increase the intellectual capacity of the community. Entrepreneurship and innovation must be at the core of universities’ mission”, and strengthen institutional commitment to supporting long-term ecosystem development. University entrepreneurship programs with the students and professors creating new innovations in engineering, computer science and life science should be incentivized and encouraged. With a more streamlined technology transfer and lowered barriers to the commercialization of research through predefined licensing terms, research-based universities could also become an essential bedrock for entrepreneurial ecosystems. It is therefore of prime importance to incentivize public and private universities to build shared knowledge and entrepreneurial ecosystems by establishing frameworks for collaborating with other African and global academia, by creating co-working spaces and incubation hubs in the domain expertise that they have naturally developed.

Private accelerators and incubators operating on an equity-based funding model characterized by competitive entry and time-capped presence in the program are becoming common and are very good assets that support startup ecosystems.

Entrepreneurial recycling is also one of the distinguished features of startup ecosystems whereby unsatisfied workers quit their job to build their own business or successful cashed out entrepreneurs reinvest their time, money and expertise in supporting new entrepreneurial activity. Other important aspects of an entrepreneurial ecosystem include cultivating a culture of diversity and openness people from all walks of life can feel at home and unleash the full potential of their creativity. Ethiopia’s vast unmet needs and unfulfilled demand make it a country ripe for technology entrepreneurship and innovation at scale.

With a local context of extreme poverty challenges and the one the world’s largest pool of young bright minds, a pan-African framework for science and technological R&D capacity building and a national framework for cultivating startup ecosystems will not only lead Africa’s digital future by leveraging existing technologies to solve its problems, but will also empower its youth to be the drivers of breakthrough innovations in untapped fields such as quantum computing, synthetic biology, artificial intelligence and the leaders of tomorrow’s sustainable industries and companies. Ethiopia needs to forge a new Pan-Africanism in a global context, put emerging technologies, data-driven decision-making as the north star of future developments and transform not only itself but the African content as a whole.

Andalem is currently conducting research on a permanent capital vehicle for financing the cultivating Ethiopia's Startup ecosystem. For more information please reach out to us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Last modified on Friday, 13 November 2020 11:22

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