THERE has always been confusion between what distinguishes start-up businesses and small to medium enterprise (SME) and how they contribute to the fiscus.
While a startup and an SME are similar, startups are typically focused on creating a new product or service,
SMEs are most likely established businesses that are focused on growing and expanding.
Startups are often associated with high-risk, high-reward ventures, while SMEs are generally considered to be more stable and less risky.
The failure to distinguish SMEs from startups has seen Zimbabwean corporates missing vast opportunities that are offered by startups.
This was one of the key takeaways from the inaugural In Conversation with Trevor (ICWT) Ideas Festival’ held in Nyanga late last month.
Zimbabwe has seen a rise in the number of SMEs over the decades, which was quickened by the indigenisation laws introduced by Robert Mugabe’s government.
However, the advent of the SME has led to start-ups being overshadowed.
According to the central bank, SMEs make up the informal sector where it is estimated that over US$14 billion is generated annually with an economic valuation of over US$8 billion.
At the festival, a panel on creating the ideal ecosystem for startups chaired by Alpha Media Holdings chairperson Trevor Ncube revealed that local start-ups struggle due to lack of support.
By their nature, start-ups are innovative and are often focused on developing a new product or service usually with limited resources but have potential to grow rapidly and achieve great success.
Some examples of well-known and successful startups include Airbnb, Uber, and Instagram, among others.
Those companies make up what is famously known as ‘Silicon Valley’, the home of startups in America.
FlexID chief executive officer Victor Mapunga said Zimbabwean corporates throttled the growth of startups by stealing their ideas.
“Today, we are talking about artificial intelligence,” Mapunga said.
“And we are being left out once again. Why? Because a startup is going to approach organisation A, which is going to have executives who are going to say, you know what? We might as well just do this by ourselves.
“That’s the problem.
“Why is it the hottest fintech product in Zimbabwe right now was created by guys who sell deep-fried chicken? Innbucks.
“How could it not have materialised from bankers?
“It’s people who sell us chicken and chips that are disrupting how we send money across the country. Something is wrong.”
Mapunga said the scenario showed that people were ‘sleeping on the wheel’ instead of innovating.
“So, when we talk about the startup ecosystem, what are we saying? We’re saying a startup plays an integral role in the economy that ensures we’re able to leapfrog,” he said.
“There is no need to host a lot of conferences where we talk about the fourth industrial revolution, but our corporates are not going to be the ones to do that.
“You know, Delta (beverage maker, Delta Corporation Limited) is not going to do fourth industrial revolution.
“We have to be honest about this stuff.
“It is going to be a startup that is going to discover something, either in artificial intelligence, either in biotech, either in blockchain, either in crypto, and they are going to be the ones to take us forward.”
He said in 2017, Zimbabwe had an amazing opportunity to be the leader in the blockchain and crypto currency revolution.
“But, unfortunately, at that time, we had individuals that decided to actually, you know, to deal a baby before it actually grew,” Mapunga said.
Raysun Capital founder Brian Munyawarara said there was limited space for startups to interface with corporates.
“I think maybe there’s an attempt to try to do it but it’s not working. I’ll give an example,” Manyawarara said.
“ In 2018, I approached a local bank. We wanted to get some financing. We met all the requirements.
“We had the business plan, we had the AAA collateral, we had everything.
“The business manager at this local bank said to me, ‘I saw your application, but unfortunately you’re very young, so I’m not going to take your application.
“And I say to him, why? Because at that point, my age didn’t matter as according to their own requirements, I met the criteria.
“So, I believe that there are a lot of gatekeepers, and you might assume that the gatekeepers are the people that are right at the top.”
Munyawarara said there were gatekeepers in big companies in key positions.
“But, at times the gatekeepers are the people that are front-facing, client-facing, the business managers, the interface, the means, or whatever, that we’re going to present these particular solutions to,” he said.
“ Even if you say I want to collaborate with you because we want to integrate how we give credit to individuals, the people that are gatekeeping keep causing problems affecting and killing start-ups within the ecosystem.”
Munyawarara said there was need for awareness about the importance of startups in an economy.
Thumeza chief executive officer and co-founder Gugulethu Siso said Zimbabwe’s economy was not conducive for startups, hence many people with ideas were moving abroad.
“The bulk of our financing came from outside of the continent,” Siso said.
“Now imagine having to borrow some money in US dollars and they are paying you back in what in essence could be half in a local currency.
“My business model was dead on the ground, so we left. It’s not something that the ecosystem could help me with.
“There is no amount of mentorship, which unfortunately is what we keep getting as startups that could help that problem.
“People keep saying that start-ups are leaving Zimbabwe, we are not being patriotic, but right now what you are looking at is the economics of the stomach and the wallet.
“So, I say the support that the ecosystem needs is that of early stage investors, people that understand that the start-ups ecosystem is a long game.”
Ryan Katai, chief executive officer and founder of Farmhut and Kwingy said there was no local company that was willing to support start-ups.
“So, either they are going to acquire me, or I’m going to outgrow them and take them out of the market entirely if they don’t grow,” Katai said.
“In Zimbabwe, no company is willing to fund start-ups. No company is willing to acquire start-ups.
“They see us as these small businesses or maybe competitors.
“So instead of us partnering or working with them, let’s make the product that looks exactly like theirs.”
The panel concluded that corporates could tap into the innovative potential of startups by investing in, or acquiring startups, which can give the corporate access to new technologies or products.
Corporates can also partner with startups to co-develop new products or services, or to provide mentorship and support to help the startup grow.
Big businesses can also create incubator or accelerator programmes to help startups get off the ground and achieve success.
One such example is the Eight2five Innovation hub spearheaded by Old Mutual Zimbabwe, which also showcased at the festival.
The festival was hosted by Ncube, in partnership with AMH, the publishers of The Standard and Zimbabwe Independent as well as NewsDay.
AMH, which is owned by Ncube, also runs the online broadcaster Heart&Soul.