Kenyan Startup Ecosystem 2020 Outlook: Exploring Open Innovation In Response To Covid-19

The Kenyan startup ecosystem has experienced tremendous growth the last decade supported by the improvement of key development indicators such as increased number of innovation hubs across the country (standing at 48 according to a GSMA 2019 report), increased funding accounting for over 18% of total African startup funding (AVCA 2020), formation of national lobbying-advocacy bodies at both county and national level as well as vertical linkages to continental platforms such as Afrilabs and I4Policy among others.

Government Initiatives Provide Support

Furthermore, the innovation ecosystem has seen support from government through the establishment of several government initiatives, including:

• Konza Technopolis, espoused to be a world class technology hub, as well as Konza data centre
• Whitebox, a platform initiated by the Ministry of ICT together with ICT Authority acting as a channel for sourcing innovation aligned to government development priorities
• National ICT Policy and the passage of the Data Protection and Privacy Act of 2019
• Development of a national optic fibre backbone promoting increased connectivity
• The Kenya industry and entrepreneurship project under the ministry of industrialization, trade and enterprise development, whose aim is to strengthen the innovation and entrepreneurship ecosystem

The Role of Innovation Hubs

Innovation Hubs in Kenya are mostly based on the type of support or facilities offered to entrepreneurs, and include incubators, accelerators, university-based innovation hubs, maker spaces, technology parks, and co-working spaces, with 25% offering co-working facilities instead of specifically tech-focused support programmes or funding (GSMA 2019). Sustainability remains a big problem with more than half of existing independently owned hubs shutting down before reaching the 5- year mark due to the lack of proper strategy in the business model, the organization structure as well as risk associated with revenue composition skewed towards grant funding.

Responding to Covid-19

The Covid-19 pandemic has greatly affected the startup ecosystem with all physical spaces closing down. The 25% of innovations hubs who rely on revenue from co-working have been particularly impacted, and there’s a growing concern that the other 75% is at risk due to contracted grant funding.

Kenya’s innovation hubs are therefore at a crossroads. At a high level, there need to be conversations about how the community can immediately plug into the existing government initiatives mentioned above such as Konza Technopolis, Whitebox and the Kenya industry and entrepreneurship project as well as the SME credit guarantee scheme.

Second, innovation hubs must shift strategy from firm level to state level so that hubs view their going concern from a national ecosystem view rather than a single entity view. In other words, innovation hubs must evaluate their collective value proposition to startups as a single unit rather as individual institutions and develop a coherent working mechanism of creating and capturing value.

These mindset shifts are critical considering Covid-19 is not going away at least in the short to medium term translating to at least 2 years. If innovation hubs don’t shift paradigms, they will close down due to depressed co-working revenue and a shift in funder priorities.

A state strategy means open innovation in the short term during the peak of the pandemic and will involve identifying and prioritizing the most pressing challenges faced by society, taking complete stock of available resources and developing interventions that can both create and capture value which will be shared among all. This can form the foundation for continued collaboration and survival of many innovation hubs in Kenya.